TaxTMI 
TaxTMI 
2024 (4) TMI 869
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....MB)2023. By the impugned order IA filed by the Appellant has been dismissed. Aggrieved by which order this Appeal has been filed. Notices were issued in the appeal by order dated 14.02.2024. On 14.02.2024 following order was passed: "ORDER (Hybrid Mode) 14.02.2024: Learned counsel for the Appellant submits that application filed by the Appellant before the Adjudicating Authority has been rejected by the impugned order observing that Applicant is not authorised by the Corporate Debtor. The Adjudicating Authority has further observed that application is Vexatious. Learned counsel for the Appellant submits that in the application Appellant has brought relevant facts and was questioning the authority of Mr. Kaneria who has filed reply in the Section 7 petition there being no authorisation by the Board of Directors of the Corporate Debtor. It is submitted that against the order an appeal was filed, which was dismissed by this Tribunal on 05.10.2023 on the ground of limitation, which order was challenged and was set aside by the Hon'ble Supreme Court. Subsequently, by order of this Tribunal dated 11.01.2024 delay has been condoned and appeal is now listed for a....
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....t Panorama. (v) In the Corporate Debtor, the Appellant along with his two brothers held 50% shares and Respondent No.2 and 3 jointly had 50% shares. There being some dispute between the Appellant and his brothers, Family Settlement Deed was executed between the Appellant and his brothers. (vi) A Mortgage Deed dated 07.09.2019 was executed by Respondent No.2 and 3 on behalf of the Corporate Debtor in favour of the Financial Creditor for immovable assets of the Corporate Debtor. (vii) There was dispute between the Appellant and Respondent Nos.2 and 3 and other members with regard to business carried on by the Corporate Debtor as well as business carried by Respondent Nos. 2, 3 and other members of Montvert Group. (viii) A Memorandum of Understanding was executed on 29.01.2022 between Appellant, Respondent Nos. 2, 3 and other members of the group under which Respondent No.2, 3 and other members agreed to retire from all companies and firm and transfer their shareholding and rights in favour of the Appellant in lieu of payment as envisaged in the Memorandum of Understanding. (ix) After Memorandum of Understanding, Respondent No.2 and 3 conti....
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.... default mentioned as 11.02.2023 consequent to Put-Option Notice issued on 12.01.2023. (xvii) In the Company Petition, notice was issued by the Adjudicating Authority on 11.04.2023. On 09.05.2023, Respondent No.2 on behalf of the Corporate Debtor filed reply. On 11.05.2023, the Company Petition under Section 7 filed by Respondent No.1 was heard and reserved. (xviii) Appellant when came to know about the notice issued in the Company Petition filed application I.A. No.2002 of 2023 on 14.05.2023 pleading that the reply filed on behalf of Corporate Debtor by Respondent No.2 has concealed various important facts. It was prayed that reply filed by Respondent No.2 be rejected and Appellant be permitted to engage any counsel to defend the Corporate Debtor. (xix) Adjudicating Authority passed an order on 17.05.2023 by which I.A. No.2002/2023 filed by the Appellant has been rejected. (xx) By a subsequent order dated 19.05.2023, the Adjudicating Authority admitted Section 7 application filed by Respondent No.1. The Appellant has filed an appeal against order dated 19.05.2023 being Company Appeal (AT) (Ins.) No. 742 of 2023 which has been dismissed by this T....
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....g, Pimpri Chinchwad. By order passed by Judicial Magistrate First Class, Pune, FIR has also been registered against Respondent Nos. 2 and 3 as well as the Financial Creditor, who all are accused in the said criminal proceeding. Respondent No.2 in reply filed in the Company Petition did not bring relevant facts on the record and reply has been filed to facilitate admission of the Section 7 application. The Adjudicating Authority has proceeded to reject the application observing that application has not been filed on the basis of board resolution hence the application need not be entertained. It is submitted that the Appellant in his applicant has not claimed that the application has been filed on the basis of board resolution rather the application has been filed by the Appellant in his capacity as Director. The Adjudicating Authority by rejecting the application of the Appellant has deprived the Appellant to bring relevant materials on record to indicate the illegalities committed by Respondent No.2 and 3 in collusion with the Financial Creditor. Learned counsel for the Appellant in support of his submission has relied on various judgments of Hon'ble Supreme Court and this Tribunal....
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....n existence of debt and default. Since the Corporate Debtor in it reply dated 09.05.2023 did not contest debt and default, the Adjudicating Authority did not commit error in admitting Section 7 application. In any view of the matter, the application filed by the Appellant, I.A. No. 2002/2023 having not disputed the debt and default, no purpose would be served in giving opportunity to the Appellant and the Adjudicating Authority has rightly dismissed his application. Learned counsel for the Respondent has referred to Para 17 of the judgment dated 05.10.2023 passed by this Tribunal in Company Appeal (AT) (Ins.) No.742 of 2023. Debenture holders having subscribed the EDPL Series A non-convertible debentures as per Debenture Trust Deed, which was amended by First Supplemental and Amendment Deed dated 27.09.2019, Debenture holders were entitled to a coupon rate of 12.5% per annum compounded quarterly. Debentures were to be redeemed in 8 quarterly instalments commencing from 31.03.2022. Put-Option Notice was issued to the Corporate Debtor on 12.01.2023 calling upon to redeem 3441 EDPL Series A non-convertible debentures. The Corporate Debtor having failed to make payment, Section 7 appli....
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....w about the proceeding on 11.05.2023, when application was filed by the Appellant on 14.05.2023, it cannot be said that there was any delay caused by the Appellant in filing application which was filed within three days from the date of hearing. The Application I.A. No.2002/2023 was filed by the Appellant on 14.05.2023 on which date the Section 7 application was still pending consideration since order were reserved on 11.05.2023. Thus, it cannot be said that application was belatedly filed. 10. We need to notice certain pleadings which was made by the Appellant in the application to find out the nature of allegations which were made by the Appellant in the application. In Para 5 of the application Appellant stated: "5. The Applicant states that, the actual understanding between the Financial Creditor and the said Company, basis which the Applicant herein is disputing the maintainability of the captioned petition, has not been brought before the Hon'ble Tribunal. Therefore, Applicant is seeking the leave of this Hon'ble Tribunal, to file a detailed reply in response to the petition filed by the Financial Creditor." 11. In Para 6 of the Application, Appellant h....
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..... Therefore, it is evident that the said Mr. Kaneria is not interested in continuing the business and safeguarding the interests of the said Company." 12. In Para 7 of the Application, Appellant has pleaded that reply filed by Mr. Kaneria - Respondent No.2 on behalf of the Company was without authority and by keeping other directors including the Appellant in dark. In Para 7 Sub-para (b), Appellant has pleaded regarding illegalities caused in the loan documents not brought to the notice of the Tribunal. Para 7(b) (i) to (ix) is as follows: " b. Illegalities caused in the loan documents not brought to the notice of this Hon'ble Tribunal: i. The Applicant states that, there are fatal illegalities in the documents allegedly executed between the Financial Creditor and the said Company. However, the said reply filed by Mr. Kaneria in the captioned petition is surprisingly silent about such illegalities. This gives rise to a reasonable apprehension in the mind of the Applicant that, the said Mr. Kaneria is acting hand on glove with the Financial Creditor, only to defraud the said Company and usurp the properties. ii. The Applicant has recently learnt abo....
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....c. Suspected collusion between the Financial Creditor and Mr.Kaneria i. It is pertinent to note that, the Financial Creditor was clearly aware that the aforesaid documents were executed by the said Mr.Kaneria and Mr. Hansalia without sufficient authority from the Company. Despite the same, the Financial Creditor has acted hand in glove with the said Mr.Kaneria and have executed these bogus documents, with an intention to defraud the said Company and grab its properties. ii. Further it appears as though, the said Mr. Kaneria is assisting the Financial Creditor so as to protect his interest with respect to his other projects wherein financial assistance has been availed from the financial creditor. It is a matter of record that, Financial Creditor advanced a credit facility in the nature of a basket to the said Company and other Obligors. Such basket finance necessarily involves multiple securities being created in favour of the Financial Creditor. In spite of the same, the Financial Creditor and said Mr.Kaneria have conspired to sell only the property of said Company over which Applicant has individual interests." 14. In the application, the Appellant has also g....
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....of Understanding both the Appellant as well as Respondent No.2 and 3 with other persons were parties. Memorandum of Understanding notices the agreement that Respondent No.2, 3 and other Directors shall retire from the shareholding in the Corporate Debtor and other companies and transfer their shareholding to the Appellant. There are dispute between the parties regarding implementation of the Memorandum of Understanding. According to the Appellant, the Memorandum of Understanding was not implemented and Respondent No.2 and 3 continued to act as Directors without there being any authority. It is submitted that certain documents including mortgage of the properties of the Corporate Debtor was executed by Respondent No.2 and 3 which does not contain any signature or consent of the Appellant. 16. The observations of the Adjudicating Authority that application has been filed to delay the proceeding also does not commend us. 11.05.2023 was the first date of hearing on which order was reserved. The application was filed within three days i.e. on 14.5.2023, hence, conclusion drawn by the Adjudicating Authority that application has been filed to delay the proceeding is without any basis. ....
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....ing Authority in the impugned order has noticed the submission made by the Respondent No.1 - Financial Creditor. The Corporate Debtor in its reply dated 07.11.2020 has accepted the loan and its liability to pay to the Financial Creditor. The order indicates that the order was passed with no contest. As observed above, the Adjudicating Authority committed error in rejecting the application of the Appellant, who vide application I.A. 572 of 2021 has brought materials for consideration under Section 7 application. We, thus, are of the view that order dated 01.11.2021 cannot be sustained and is set aside. In result, I.A. No. 572 of 2021 is allowed, the Appellant is allowed to intervene in the matter. I.A. No. 572 of 2021 as well as C.P. No. 395/IBC/NCLT/MAH/2021 are revived before the Adjudicating Authority which need to be considered afresh after hearing the parties. Both the Appeals are allowed accordingly." 19. Learned counsel for the Appellant relying on the said judgment submits that when allegations were made in his application, the Adjudicating Authority was obliged to look into the allegations if there were any grounds in the prayers made in the application. 20. ....
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....that if any judgment or order is obtained by fraud said judgment is in nullity. There is no dispute to the above proposition of law, however, in the present case we are only concerned with the order passed by the Adjudicating Authority rejecting the I.A. filed by the Appellant. Order passed by the Adjudicating Authority under Section 7 admitting the application has been separately challenged which was upheld by this Tribunal and the matter is pending in the Hon'ble Supreme Court. Hence, we in this appeal are not concerned with order passed by the Adjudicating Authority admitting Section 7 application. 23. Learned counsel for the Appellant has also referred to the judgment of this Tribunal in "Hytone Merchants Pvt. Ltd. vs. Satabadi Investment Consultants Pvt. Ltd., Company Appeal (AT) (Ins.) No.258 of 2021", where in Para 31 and 32 following has been held: "31. We have heard argument of the Learned Counsel for the parties and perused the record. Based on the pleadings of the parties, the question that arises for our consideration is as under; Whether the petition complying with all requirements of Section 7(5) of the Insolvency and Bankruptcy Code, 2016, but if....
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.... by the borrowing company under such circumstances cannot be defeated merely on the ground that no such resolution was in fact passed. The passing of such a resolution is a mere matter of indoor or internal management and its absence, under such circumstances, cannot be used to defeat the just claim of a bona fide creditor. A creditor being an outsider or a third party and an innocent stranger is entitled to proceed on the assumption of its existence; and is not expected to know what happens within the doors that are closed to him. Where the act is not ultra vires the statute or the company such a creditor would be entitled to assume the apparent or ostensible authority of the agent to be a real or genuine one. He could assume that such a person had the power to represent the company, and if he in fact advanced the money on such assumption, he would be protected by the doctrine of internal management." 25. Learned counsel for the Respondent has also relied on judgment of Hon'ble Supreme Court reported in "(1996) 6 SCC 660, United Bank of India vs. Naresh Kumar and Others" where considering Order VI Rule 14 of Civil Procedure Code, the Hon'ble Supreme Court has observed that in a....
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....distinctly not as extensive as that of a civil court to enquire into disputes arising out of MoUs and related specific performance which have been agitated in the IA. Allowing such meritless and unscrupulous litigation would logically entail derailing the insolvency resolution process which goes against the twin objectives of the IBC of maximization of the value of assets and time-bound insolvency resolution." 27. It is true that this Tribunal while deciding the Company Appeal (AT) (Ins.) No.742 of 2023 filed by the Appellant by order dated 05.10.2023 has also noticed the I.A. No.2002/2023 and made certain observations. The observations made in the order dated 05.10.2023 were in reference to consideration of challenge to the order dated 19.05.2023 admitting Section 7 application. Order passed on 17.05.2023 was not under challenge in Company Appeal (AT) (Ins.) No.742 of 2023, hence, the observation made by this Tribunal in said judgment at best can be treated as an observation in reference to challenge to the order dated 19.05.2023 and cannot be read as finding in reference to the appeal filed by the Appellant challenging the order dated 17.05.2023 rejecting I.A. No.2002/2023. ....