TaxTMI 
TaxTMI 
2023 (5) TMI 724
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....aw Tribunal, New Delhi Bench-VI). 2. Heard the Counsel for Parties and perused the records made available including cited judgments. 3. The Counsel for Appellants stated that the present joint appeal has been filed on behalf of Gurudeo Exports Corporation Private Limited ("GECPL") - Appellant No. 1, Shree Kalka Global ("SKG") - Appellant No. 2, Neon International Traders ("NIT") - Appellant No. 3 and TLS Mercantile Pvt. Ltd. - Appellant No. 4, being aggrieved by the common 'impugned order' dated 11.03.2021 under Section 60(5)(c) of the Code, wherein by the 'Appellants' herein filed the joint application against the 'Resolution Professional' of 'Amira Pure Foods Private Limited' ('Corporate Debtor'). The 'Resolution Professional' had rejected the claims of all the four applicants, who have petitioned the 'Resolution Professional' to settle their claims, by a common e-mail dated 06.11.2019. The four Petitioners sought return of stock of their owned rice from the 'Corporate Debtor'. 4. The 'Appellants' submitted that pursuant to oral business agreements since 01.10.2016, the 'Appellants' used to purchase rice from various suppliers across the country and delivered rice ....
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....irectly to the premises of the 'Corporate Debtor'. The 'Appellants' explained that this was a simple business model which involved purchases of rice by the exporters/ domestic seller (like the 'Appellants' herein) which was delivered to the premises of the 'Corporate Debtor' for processing & packaging and finally export/ domestic sale from the 'Corporate Debtor's' premises itself. The 'Appellants' stated that all the parties used to honour this time-tested business arrangement and the arrangement was working smoothly in the present case also from October 2016 to August 2018. The 'Appellants' however, stated that from September 2018, this process was not honoured by the 'Corporate Debtor', who did not permit the 'Appellants' from taking back their own rice. 8. The 'Appellants' stated that on 11.12.2018, the 'Adjudicating Authority' passed an order initiating 'Corporate Insolvency Resolution Process' (in short 'CIRP') against the 'Corporate Debtor' and appointed Mr. Akash Singhal as 'Interim Resolution Professional' (later confirmed as 'Resolution Professional', who finally became the 'Liquidator'). 9. The 'Appellants' stated that at insolvency commencement date, large quantity....
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....t No. 2' clarified that on purchase of rice an invoice was issued by the supplier to the 'Appellant No. 2' and further consignment note was generated containing details of the rice. The 'Corporate Debtor' also confirmed receipt of the rice by way of various e-mails, however despite several correspondence with the 'Resolution Professional', the 'Resolution Professional' failed to give any response or seek additional clarifications and finally rejected the claims for return of rice to the 'Appellant No. 2' in violation of the oral agreement and against the spirit of the Code. 12. The 'Appellant No. 3' i.e. Neon International Traders, from 03.05.2017 to 01.08.2018, had purchased and supplied to the 'Corporate Debtor' various varieties of rice aggregating to 811.03 MT and received back rice except 84 MT which was illegally held by the 'Corporate Debtor'. The 'Appellant No. 3' further stated that he has written several letters/e-mails to the 'Resolution Professional' for his claims and received back replies vide letters/e-mails and the correspondence exchanged were dated 18.02.2019, 11.03.2019, 29.07.2019, 25.08.2019, 31.08.2019 and 10.09.2019. The 'Appellant No. 3' clarified that....
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....the 'Corporate Debtor' and 'Document Experts' (M/s Lunawat & Co.) to ascertain whether or not the oral agreements between the parties could be referred to on the basis of documents available with the parties. The 'Appellants' stated that they have fully cooperated with both experts and gave all documents as required. Rice expert gave its report on 10.10.2020 and document expert gave its report on 12.10.2020 which were filed by the 'Appellants' before the 'Adjudicating Authority'. 15. The 'Appellants' stated that the rice expert gave its report in favour of the 'Appellants' but the document expert gave its report against the 'Appellants'. The 'Appellants' submitted that they had filed detailed objection to the document expert's report and subsequently after detailed hearing the 'Adjudicating Authority' passed finally the 'impugned order' dated 11.03.2020 dismissing the Company Petition bearing no. CP-846/ND/2018 in CA No. 215 of 2020. 16. The 'Appellants' assailed the 'impugned order' which ignored the report given by the rice expert and considered the document expert export which was without any basis. The 'Appellants' also assailed the 'impugned order' on the ground that var....
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....aterial receipt notes, correspondence exchanged between the parties, acknowledgement by Mr. Himanshu Miglani (an ex-employee of the 'Corporate Debtor', who tried to act as a mediator for the 'Appellants' before the 'Resolution Professionals'), Reconciliation Statements prepared by the 'Appellants' showing the date of delivery, etc. The 'Respondents' mentioned that in the alleged Reconciliation Statements prepared by the 'Appellants', the 'Material Receipt Notes' (MRN Nos.) were mentioned to show the date of delivery, however the same were not complete and missed out several MRN Nos. in the Reconciliation Statement and for such cases the 'Appellants' did not mention the date of delivery, specific reference to any challan issued regarding return of material receipts etc. The 'Respondents' further alleged that the 'Appellants' submitted some of the unilaterally executed documents in support of the claims of delivery of rice which were not supported by any MRN or any material evidence. 21. The 'Respondents' submitted that the 'Appellants' had furnished 'Item Ledger (quantity)' of rice in their own stock registers provided to the 'Corporate Debtor' with admission that the 'Appellants....
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....ity' in CA No. 163 of 2019 and based on the which, the directions were issued by the 'Adjudicating Authority' to the IBBI, who in turn, filed criminal case against the Suspended Director of the 'Corporate Debtor' before Session Court of Dwarka vide CC No. 1659 of 2019. 25. The 'Respondents' stated that initially, Brijesh Kumar Gupta and Associate, Chartered Accountants, were appointed to ascertain the claims of the 'Appellants' who submitted their Report on 21.02.2019 contesting the claims of the 'Appellants' regarding alleged agreements between the 'Appellants' and the 'Corporate Debtor' and found that no such agreements have been proved based on evidence and the documents submitted by the 'Appellants' which were not sufficient to prove the claims of the job work agreements between the 'Appellants' and the 'Corporate Debtor'. 26. The 'Respondents' emphasised that it was only on the request of the 'Appellants' that the 'Adjudicating Authority' appointed rice expert and document expert. The 'Respondents' submitted that the 'Report' of the rice expert did not identify seven items out of eight items claimed by the 'Appellant No. 1', and for eighth item- 42 MT of Imperial B....
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....he provisions of the Companies Act, 2013. The 'Respondents' stated that only authorised persons by the Board with specific-authority can enter into any specified agreement with third party which is absent in the present case and therefore the arguments of the 'Appellants' of so-called business chain based on oral agreement is not legally tenable. 30. The 'Respondents' submitted that the 'Appellants' claims to have entered into agreement with the 'Corporate Debtor' from 01.10.2016 with the 'Corporate Debtor', has been raised for the first time in this appeal and no such claims was forming part of CA 215 of 2019 before the 'Adjudicating Authority'. The 'Respondents' submitted that even here the 'Appellants' failed to disclose the name of persons who entered into such agreement and their capacity and authority. 31. The 'Respondents' stated that the MRNs allegedly to have been issued by the 'Corporate Debtor' to the 'Appellants' do not support the claim of the rice of the 'Appellants'. The 'Appellants' have claimed that their ownership rice were lying in the premises of the 'Corporate Debtor', however, the large number of MRNs which have neither been referred nor in possession of....
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....tary or legally substantiable evidence and the alleged claim of oral agreement w.e.f. 01.10.2016 is also not proved by the 'Appellants'. 38. The 'Respondents' submitted that the alleged claims of the 'Appellants' regarding supply of rice for job work are not supported with the MRNs claimed to have been issued by the 'Corporate Debtor' for the reasons as explained hereinbefore. It is reiterated that the 'Appellants' claims for receiving back such processed goods from the 'Corporate Debtor' are not supported with any MRN or Delivery Challan. In addition to above, the document expert and rice expert report do not support such alleged claims of the 'Appellants'. 39. The 'Respondents' mentioned that the alleged stocks that are claimed by the 'Appellants' in CA 215 of 2019 were lying in the godown of the 'Corporate Debtor' where at number of places the board is displayed that contains 'Stock hypothecated to Banks', who disbursed more than Rs. 1,700 crore against stock and book debts to the 'Corporate Debtor', hence, the 'Appellants' cannot claim the ownership of such stock as owned by the 'Appellants'. It is also pertinent to mention here that as per the valuation carried out by th....
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....gally retained by the 'Corporate Debtor', approached the 'Respondents' (the 'Resolution Professional'/ 'Liquidator') demanding return of the rice. It is further the case of the 'Appellants' since they made the payment of the rice and the role of the 'Corporate Debtor' was confined merely to the assigned activities in order to make the raw rice to the export quality and the 'Appellants' always remained the owners of the said rice. According to the 'Appellants', since the 'Corporate Debtor' did not have any ownership over the rice, the 'Resolution Professional' and subsequently the 'Liquidator' had no business or authority to deny the claims of the 'Appellants' to return the rice, in accordance with the law of the land/ the Code. 42. It is further the case of the 'Appellants' that although there were no written agreements between the parties, however, the facts of the case and the details of the transactions were available through series of documentary evidence including MRNs, invoices, details of trucks, Reconciliation Statements prepared by the Appellants' and the acknowledgment by Mr. Himanshu Miglani who was an ex-employee of the 'Corporate Debtor'. 43. The 'Appellants' emp....
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....rtnership firm. It is a matter of fact that a company registered under Companies Act has distinct legal identity and it conducts 'Operation & Management' of the company through its Board of Director, which in turn, through proper board resolutions, authorises to enter into the agreement and the contracts. The 'Appellants' herein failed to give any such details of legally enforceable agreement for contracts whether written or oral. It is also a standard norm that the corporate entity does business based on written binding contracts which are legally enforceable contracts to protect their rights. 47. The Indian Contract Act 1872, section 2(e), defines an agreements as "every promise and every set of promises, forming the consideration for each other is an agreement". It is important to note that all contracts are valid agreements but not all agreements qualify as valid contracts. An oral agreement is as equally valid, as a written one. The legality, of an oral agreement, cannot be questioned, if it falls under the ambit of the requirements stated in section 10 of the Indian Contract Act, 1872. A valid oral agreement is of value and can be enforced in the court of law. However, it ....
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....gards to the above stated job work and charges thereon, quantity sent for job work, the quantity deducted on account of 3% charges and the fact that there is no agreement with either of 4 vendors (3 from Indore & 1 from Chennai) raises doubts. b) That these four parties failed to provide any invoice raised by APFPL for the job work charges. informed, APFPL had not issued any invoice for the charges levied by it/ quantity deducted by it and amounts so paid in kind through BARTER system are covered as service charges in GST, but no GST liability was discharged at any point of time. c) That all the 4 vendors have submitted that they have not accounted for these job work charges in the books of accounts as there was no financial transaction except deduction of 3% quantity of rice from consignment by APFPL which again raise doubts how the quantitative transactions are reconciled in financial books. d) That since none of the vendors have accounted for these transactions in the books, TDS has also not been deducted as per provision of Income Tax on payments (in kind) to APFPL. In absence of any Invoice for job work and no deduction of tax at source, it is surpri....
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....APFPL except execution of export delivery from their premises by SKG which shows APFPL İs not in picture so far as transactions of NEON is concerned as claimed. b) All these supplies of 811.03 MT was exported to AMIRA, USA, Dubai, Germany and to TGG Australia. Out of this 64% of supplies were made to subsidiary/associate companies of APFPL which shows direct connection of APFPL with NEON c) It is further claimed that 2 consignment of 42 MT each exported in March-April 2018 to TGG Australia were returned due to quality/brand issue by the importer and same were at APFPL Gurgaon. In our opinion, the NEON should have claim on SKG and not APFPL with regard to this 84 MT. d) It is noted that there were 2 consignment of 42 MT each valued INR 66.23 Lac and were exported to AMIRA GMBH Germany on 15.05.2018 & 26.05.2018 which remained unpaid till 2019. On 11.12.2019 the vendor has reversed these transactions in books by passing an entry of re-purchase for which no explanation provided. Status and accounting of these stocks in books has also not been explained....records also which is not in accordance with guidelines. TLS Mercantile Pvt Ltd: As claime....
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....PFPL and 42 MT export returned rice. a) The vendor has submitted that there is no formal & written agreement for these services and job work charges thereon and also no financial transaction has been accounted for in the books including in inventory records in this regard which has resulted in contraventions of the provisions of GST & Income tax. No satisfactory explanation provided by the vendor for these lapses b) Out of some of consignments of March, April & May 2018 so delivered at the premises of APFPL Gurgaon for job work, APFPL withhold 249.33 MT of rice out of different consignments so delivered. In spite of this withholding of stocks, the vendor continued to supply the consignments till 21.08.2018. It is further observed that APFPL provided last job work on 24.06.2018 and 133.28 MT of rice in July 2018 till 21.08.2018. No explanation provided in this regard c) All these supplies of 1373.62 MT was exported to AMIRA, USA, Dubai, Germany and to TGG Australia. Out of total exports by GECPL, 65% of supplies were made to subsidiary/associate companies of APFPL and balance to TGG Australia. d) It is further claimed that 1 consignment of 42 MT e....
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....PL has not provided any services for these consignment vendor has not mentioned any job work charges against these consignment. Since there is no job work or service charges against these consignment as per statements provided by the vendor, we are failed to understand the Logic of sending these consignment & then dispatching to other customer from APFPL Gurgaon premises without any charges. No explanation provided in this regard by the vendor. b) The vendor has submitted that there is no formal & written agreement for these services and job work charges thereon and also no financial transaction have been accounted for in the books Including in inventory contraventions of the provisions of GST & Income tax Act. No satisfactory explanation provided by the vendor for these lapses. c) It is observed that out of some of consignments from 14.02.2018 so delivered at the premises of APFPL Gurgaon for job work, APFPL withhold 274.18 MT of rice out of different consignments so delivered. In spite of this withholding of stocks, the vendor continued to supply the consignments till 23.08.2018. It is further observed that APFPL provided last job work on 11.08.2018 and in spite....
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....hich shows that they were the owner of the stock of rice that they are claiming to be their own as these stocks are not forming part of their own books of accounts. d) These four vendors have provided their own documents which we consider as single sided records and statements from vendors only. Not even a single confirmation from APFPL with regard to holding of stock by them or export returns and any financial transaction e) There cannot be so many co-incidences in all these web of transactions as claimed by all the vendors and point towards circular and round tripping transactions viz: I. All 4 vendors have claimed that there is no formal agreement for job work with APFPL; II. All vendors had dealing tenure with APFPL from August- September 2017 till July-August 2018 except SKG who was dealing since 2016. III. APFPL started withholding consignment of all vendors from March 2018 and all of them continued to supply consignments in spite of these withholding of stock by APFPL IV. All vendors supply to TGG Australia during March 2018 with returned İssue end-April of Quality/Brand and all supplies were returned at AMIRA Gurgao....
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.... (i) No cogent reasons as to why, the 'Appellants' continued to supply the rice when even allegedly earlier rice were not returned. (j) No confirmation of holding of stock for job work by the 'Corporate Debtor' over the period of alleged two years. (k) No disclosers made by the 'Appellants' in their own financial record disclosing the fact that claimed stocks belongs to the 'Appellants' are lying with the 'Corporate Debtor' for job work. 50. This 'Appellate Tribunal' prima-facie do not find any fault in the report of the document expert. The report of the rice expert seems logical and based on all documentary evidence made available to experts. 51. This 'Appellate Tribunal' observe that the claims of the 'Appellants' need to be crystal clear and cannot be on the basis of assumptions and presumptions like Oral Agreements without any specific details, more so when the 'Corporate Debtor' and the Suspended Director/ Corporate Debtor were allegedly involved in fraud with Bank for over Rs. 1700 crores and who were investigated by the CBI and case seems to be still on. 52. Similarly, this 'Appellate Tribunal' has also taken note of the report of Mr. Om Prakash....
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....vice tax or GST or TDS under Income Tax Act, could be furnished by the 'Appellants' which could help us to establish the claims of the 'Appellants' as supporting documents. The absence of such tax documentation do not help in supporting the claims as an additional proof of such transactions. 57. Similarly, this 'Appellate Tribunal' also note that no records of such transactions have been reported by the 'Appellants' in their financial statements or stock registers, which also do not help the 'Appellants' herein in substantiating their claims and rights against the 'Corporate Debtor'. 58. This 'Appellate Tribunal' also note from the averment of the 'Respondents'/ 'Liquidators' that the 'Appellants' could not produce the material receipt notes issued by the 'Corporate Debtor' as per their own reconciliation Statements and there is a huge gap of 383.67 MT of Appellant No. 1, 562.19 MT of Appellant No. 2 and 5.31 MT of Appellant No. 4. Absence of such vital records, based on which claims have been filed, again do not help the cause of the 'Appellants'. 59. This 'Appellate Tribunal' note with caution the contradictory stand taken by Mr. Himanshu Miglani and also the fact that t....
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.... Pvt. Ltd., Harsau, Gurgaon would be referred as "APFPL" I have been appointed on 03.09.2020 by the Four entities, namely, GECPL, SKG, NIT and TLSMPL, in terms of order dated 24.08.2020 of Hon'ble NCLT Special Bench, Court VI, Delhi for identification of quality/grades and varieties of the Rice given on Job Work to APFPL, reportedly, related to above four entities. I have carried out identification/grades and varieties of Rice with APFPL, based on the Documents and information provided to me by the above parties concerned. I have carried out the identification/grades and varieties of Rice with APFPL and visited the site along with representatives of the entities along with Liquidator & his staff and the document expert. Based, on my estimation/experience and long standing in the field of Rice only I report my findings as under: Scope of Job: To identify/quality of Rice with APFPL claimed by above entities. Location of visit for the Job: Amira Pure Foods Pvt. Ltd. situated at 21st Milestone, Pataudi Road, Harsaru, Distt. Gurgaon-123504 (Haryana) Date of visit: 09.10.2020 emplartan huy Document 2 OM PRAKASH GARG RICE EXPERTS 522....