TaxTMI 
TaxTMI 
2024 (9) TMI 1092
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....hutosh Gupta , Mr. Gaurav Rana , Mr. Nimesh , Mr. Ajitesh Kumar , Advocates For the Respondents : Mr. Akshay Goel , Harsh Jadon , Adv. for R5 Mr. Anshuj Dhingra , Kartik Sethi, Shubhamngda Singh , Muskan Bagga , Adv. For R1 JUDGEMENT NARESH SALECHA , MEMBER ( TECHNICAL ) 1. These three Appeals have been filed against the common Impugned Order dated 16.02.2023 passed by the National Company Law Tribunal, Mumbai Bench, Court-III (in short 'Adjudicating Authority') in IA No. 47 of 2021 in Company Petition being C.P. (IB) - 3753(MB)/2018, which was filed by Malharshanti Enterprises Limited ('Operational Creditor') against the CAN Enterprises Pvt. Ltd. ('Corporate Debtor'). 2. In Company Appeal (AT) (Ins.) No. 545 of 2023, Mr. Manish Jaju, Resolution Professional of the Corporate Debtor is the Appellant. The Respondents in this appeal are Malharshanti Enterprises Limited is the Corporate Debtor (Respondent No. 1), Naresh Sevantilal Shah (Respondent No. 2) and Charu Naresh Shah (Respondent No. 3) who are Suspended Directors of the Corporate Debtor. The Company Appeal bearing Company Appeal (AT) (Ins.) No. 545 of 2023 has been filed by the Mr. Manish Jaju who has challen....
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....r such further and other reliefs, as this Hon'ble Tribunal may deem fit and proper in the nature and circumstances of the case." 5. The third Company Appeal bearing Company Appeal (AT) (Ins.) No. 600 of 2023 has been filed by Naresh Sevantilal Shah and Charu Naresh Shah who are Suspended Directors of the Corporate Debtor against the Malharshanti Enterprises Limited who is the ('Operational Creditor') as Respondent No. 1, CAN Enterprises Pvt. Ltd. ('Corporate Debtor') as Respondent No. 2, Mr. Jitendrakumar Rambaran Yadav, Erstwhile Interim Resolution Professional of the Corporate Debtor as Respondent No. 3, Mr. Manish Jaju who is the Resolution Professional of the Corporate Debtor as Respondent No. 4 and Paton Construction Pvt. Ltd., the Financial Creditor as Respondent No. 5. The Applicants in this appeal have sought following reliefs:- "a. That this Hon'ble Tribunal be pleased to set aside the order dated 16th February, 2023 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench, in IA No. 47 of 2021 in CP (IB)/ 3753 (MB)/2018. b. For Costs; c. For such further and other reliefs, as this Hon'ble Tribunal may deem fit and ....
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....e Debtor by Suspended Director at all level including, this Appellate Tribunal as well as the Hon'ble Supreme Court of India and at all places, the judgement came in favour of the Operational Creditor. 11. In this background, we will look into now challenged Impugned Order dated 16.02.2023. The present Resolution Professional Mr. Manish Jaju rejected the claims of Operational Creditor in totality and also admitted the claims of one Unsecured Financial Creditor i.e., Paton Construction Pvt. Ltd. for Rs. 1,05,877/- and changed the Constitution of Committee of Creditor ('CoC'). It is observed that after initiation of CIRP, public announcement dated 22.02.2020 was issued by Erstwhile IRP and Operational Creditor filed its claim along with proof on 06.03.2020 and the same was admitted. 12. From the Impugned Order, we note that Mr. Manish Jaju was appointed as Resolution Professional by an order dated 09.06.2020 passed by Principal Bench of NCLT in Interlocutory Application No. 1007 of 2020 replacing Erstwhile IRP Mr. Jitendrakumar Rambaran Yadav. Malharshanti Enterprises Limited (Operational Creditor) on 02.07.2020 filed an Interlocutory Application bearing I.A. No. 1241 of 202....
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.... second demand notice dated 23rd August, 2018? b) Whether the Adjudicating Authority rightly allow the petition of the Operational Creditor under section 9 of I&B Code? 30. In the case of Mobilox Innovations Pvt. Ltd. vs Kirusa Software (P) Ltd. reported at (2017) 1 SCC OnLine SC 353 the Hon'ble Supreme Court held as to what are the facts to be examined by the Adjudicating Authority while examining an application under section 9 of I&B Code which is reproduced below : "33. The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e., on nonpayment of a debt, any part whereof has become due and payable and has not been repaid), deliver a demand notice of such unpaid operational debt or deliver the copy of an invoice demanding payment of such amount to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may be (Section 8(1)). Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of t....
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....December, 2017 when the Corporate Debtor responded for the first time in its reply to the notice issued by the Operational Creditor under Section 8(1) of I&B Code. We have noted that a large number of email communications has been made by the Operational Creditor and not even a single response was made by the Corporate Debtor raising such disputes. 32. The Contention of the Appellant that the relevant date for determining whether there was a pre-existing dispute was the date of second demand notice, i.e. 23rd August, 2018 and not the first demand notice dated 2nd December, 2017 as the first petition was dismissed by the Adjudicating Authority as the Petitioner Counsel had asked for withdrawal of the first petition due to incorrect claims made under first application, with a liberty to proceed against the Corporate Debtor with a correct claim as envisaged under I&B Code. The above Contention raised by the Appellant cannot be sustained. The Adjudicating Authority has rightly relied upon the ratio laid down by this Tribunal in the case of Dinesh Gupta vs. Hajura Singh Bhim Singh & another, Company Appeal (AT) (Insolvency) No. 99 of 2018 wherein is was held that: ....
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.... appointed by the Corporate Debtor. Moreover, the Municipal Corporation in September, 2016 issued Occupation Certificate to the Appellant. If there were any discrepancies, the appellant could not have obtained Occupation Certificate from municipality. This also shows that all the defects pointed out by the architect have been timely rectified within the appropriate time, so that the Municipal Corporation found it appropriate to issue the Occupation Certificate. 36. In the light of the above observations and the records placed before us. We are of the view that there was no dispute existing prior to the first demand notice and only disputes raised prior to the first demand notice are relevant to determine its pre-existence and disputes raised thereafter are totally irrelevant for the same. Also the arbitration was invoked after the first demand notice. Thus the Adjudicating Authority have rightly concluded that there was no dispute existing prior to the demand notice issued under section 8 of I&B Code. 37. Therefore, we are of the considered opinion that there is no reason for interference with the impugned order passed by the Adjudicating Authority. Hence Appeal i....
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...."constructive res judicata applies to every subsequent proceedings except in cases in which the earlier matter was decided ex-parte. 18. The Respondent Nos. 2 and 3 who are the members of the suspended board have no locus once again to raise any please with regard to the merits of the claim of the Operational Creditor in view of finality of the admission order and they are not at all necessary parties to this application. 19. This Bench further observes that the Resolution Professional has miserably failed to understand that the above CIRP order was passed by the adjudicating authority after prima-facie satisfying about the existence of 'debt' and 'default' of more than Rs. 1,00,000/- as on the date of filing the Company Petition and he shall not reject such claim of the Operational Creditor in toto by ignoring the concurrent findings of the adjudicating authority and the appellate authority. 20. It is appropriate to mention here that the RP herein filed an application bearing I.A. No. 375/2021 which is also pending before this Bench for withdrawal of the CIRP order under Section 12(A) of the Code on the ground of purported settlement entered into by the ....
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....or. 20. It would be worthwhile to note the table made by the Appellant in the present appeal in Para 5 which reads as under : - 21. From above, we note that total claims against the Corporate Debtor were Rs. 3,73,31,326/- and the Appellant admitted of Rs. 1,78,30,247/- and the claims of the original Operational Creditor (on whose application was initiated CIRP against the Corporate Debtor vide order dated 21.01.2020 for Rs. 1,95,01,079/-) was entirely rejected, whereas a fresh unsecured financial debt claim, which were received after initiation of the CIRP, from Paton Construction Pvt. Ltd., was admitted in full and was also declared as "Sole CoC Member" and the claim by the Suspended Director of the Corporate Debtor of Rs. 1,77,24,370/- was also admitted in full. 22. It is the case of the Appellant that after examining the books of the Corporate Debtor it came to his notice that no dues were outstanding and payable to the Malharshanti Enterprises Limited (Operational Creditor). The Appellant further submitted that he requested for documentations from the Malharshanti Enterprises Limited to substantiate its claims but received reply raising frivolous issues "including unau....
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....came to conclusion that the documents were not enough to establish the claims of the Malharshanti Enterprises Limited and therefore the Appellant rejected the claims of the Operational Creditor vide e-mail dated 10.09.2021. 28. Concluding his remarks, the Appellant submitted that the Impugned Order need to be rejected. 29. Per contra, the Respondent No. 1 denied all the allegations of the Appellant labelling these as mischievous and misleading. 30. The Respondent No. 1 submitted that the Adjudicating Authority correctly admitted his claims and ordered for CIRP against the Corporate Debtor vide order dated 27.01.2020 which was challenged by Suspended Director of the Corporate Debtor and this Appellate Tribunal vide order dated 19.01.2021 dismissed the appeal upholding the correctness of the CIRP vide order dated 27.01.2020 and rejecting all the issues raised by the Suspended Director. The Respondent No. 1 submitted that the suspended Board of Directors preferred a SLP against this Appellate Tribunal Order dated 19.01.2021 before the Hon'ble Supreme Court of India and the said SLP was withdrawn and therefore, under these circumstances, the CIRP Order dated 27.01.2020 admitti....
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....or as well as that of the suspended Director clearly establish malafide intentions and therefore the Respondent no. 1 filed an IA bearing no. 1241/2020 before the Adjudicating Authority challenging the constitution of sole member CoC. The Respondent No. 1 alleged that in retaliation and even before the 3rd CoC meeting could be conducted, the Resolution Professional vide Email dated 02.12.2020 rejected the legitimate claims of the Respondent No. 1 so that the alleged Unsecured Financial Creditor as sole CoC member could pass a resolution to withdraw the CIRP against the Corporate Debtor and indeed this exactly happened. 37. The Respondent No. 1 submitted that in the third CoC meeting dated 07.12.2020, the Financial Creditor, sole CoC member contended that he does not wish to continue with the CIRP and wants to continue its business with the corporate debtor and therefore, the Resolution Professional filed an application for closure of CIRP through IA 375/2021 under section 12A of the Code. 38. The Respondent No. 1 stated that consequent upon rejection of his claim, the Respondent No. 1 moved an Application bearing no. 47/2021 before the Adjudicating Authority against the rejec....
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.... is of neutral qua the claim of any creditor and therefore there cannot be any interest in the matter let alone any personal interest since he is only a creature of the Code with specific role and obligations. The Respondent No. 1 cited judgement of the Hon'ble Supreme Court of India in the matter of Regen Powertech (P) Ltd. v. Giriraj Enterprises & Anr. [(2023) ibclaw.in 111 SC.] in support of this argument. 42. The Respondent No. 1 concluded his remarks stating that there was no error in the Impugned Order and the appeal is without any merit and deserves to be set aside with exemplary cost. Findings 43. We note that the role of the Resolution Professional, the Appellant herein, has been defined in the Code, inter-alia, regarding collation of claims as against the adjudicator's role given to the liquidator qua the claims filed in the liquidation proceedings, whereas, in the present case the Appellant has gone ahead in deciding the claims and also decided to offset the claims by raising a counter claims against the Operational Creditor on his own. 44. We have also noted that the prayers made in the present appeal (all specific prayers noted earlier), nowhere the prayer ....
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....e facts and circumstances, the Resolution Professional should not have filed the present appeals. The Resolution Professional should have maintained a neutral stand. It is for the aggrieved parties, including the Committee of Creditors of Regen Powertech Private Limited (RPPL) and Regen Infrastructure and Services Private Limited (RISPL), to take appropriate proceedings or file an appeal before this Court. Recording the aforesaid, the present appeals preferred by the Resolution Professional are dismissed as not entertained." (Emphasis Supplied) 49. In this detailed background, we wonder as on what basis the Resolution Professional dismissed the claims of the Operational Creditor altogether which has gone through the entire round of litigation from the Adjudicating Authority to this Appellate Tribunal to the Hon'ble Supreme Court of India. Prima-facie this is much beyond his role and scope. If such approach of Resolution Professional is to be accepted then the whole process of CIRP proceedings can get demolished. 50. It is further interesting to note that one Unsecured Financial Creditor, namely, Paton Construction Private Limited who is supposed to have give....
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....dmitted in full by the Erstwhile IRP after verification of all documents, we do not need to go into these aspects again which has attained finality at all judicial fora including the Hon'ble Supreme Court of India. 57. The entire sequences of events leaves much less to be desired as it become quite clear that there seems to be conjoint action on part of the Resolution Professional along with the Suspended Director of the Corporate Debtor and Unsecured Financial Creditor i.e., Paton Constructions Pvt. Ltd. to derail the process of CIRP and to deny the admitted claim of the Operational Creditor. This is evident from fact that the Resolution Professional filed CP (IB) 3753/MB/C-IV/2018, as per direction of single Member of CoC for closure of CIRP under Section 12 A of the Code. The aforementioned circumstances point out the high handedness and the malafide intentions of the Appellant conjointly with suspended Directors of Corporate Debtor and the Unsecured Financial Creditor. 58. We note that although the Adjudicating Authority in Impugned Order dated 16.02.2023 in Para 22 has recorded that "the conduct of the Resolution Professional also need to be thoroughly investigated". ....
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....orate Debtor. The Appellant submitted that though I.A. No. 1241 of 2020 was listed, however, the Adjudicating Authority disposed the IA No. 47 of 2021 by way of Impugned Order dated 16.02.2023 by placing reliance of forensic audit report and gave relief beyond sought in the pleadings concluding that the transaction between the Appellant and the Corporate Debtor is "ingenious idea of the members of the Suspended Director of the Corporate Debtor." 63. The Appellant submitted that he is Financial Creditor, who meets the criteria of Rs. 1 Lakh and therefore was within his right to be sole CoC Member with 100% voting rights. The Appellant defended the action taken by the CoC and assailed the Impugned Order which has gone beyond jurisdiction of the Adjudicating Authority in treating the Financial Creditor unjustly and unfairly. 64. Concluding his remarks the Appellant requested to set aside the Impugned Order. 65. Per contra, the Respondent No. 1 Malharshanti Enterprises Limited denied of the allegations of the Appellant labelling these as mischievous and misleading. The Respondent No. 1 emphasised that the Appellant has been inducted in the CoC only to frustrate the CIRP and to....
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....s reserves and surplus; therefore in such circumstances it is surprising that Corporate Debtor hurriedly availed a meagre loan of Rs. 1 Lakh from Appellant immediately on the next day of conclusion of oral arguments before the NCLT to defraud the Operational Creditor. 70. The Respondent No. 1 submitted that vide email dated 14.03.2020, the erstwhile IRP issued agenda of first CoC meeting and vide the said email, the identity of the Appellant was recognized for the first time against which the Respondent no. 1 vide email dated 17.03.2020 objected the Appellant's claim as the sole CoC member. On 18.03.2020, the first CoC meeting was conducted wherein the erstwhile IRP admitted the claims of the Respondent no. 1 and also the Respondent no. 1 was apprised of the fact that Appellant had lent a sum of Rs 1 lakh to the Corporate Debtor on 06.09.2019. The erstwhile IRP also recorded in the meeting that the claim of the Respondent No. 1 was verified and admitted on the basis of the supporting documents provided by the Respondent No. 1. The Respondent No. 1 alleged that since the Appellant became the sole member of CoC, therefore without any reason, in the very same meeting on 18.03.2020,....
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....have mere observation on the basis of inconsistency drawn by the forensic auditor in its report and also clearly in the facts of the case. 75. Concluding his arguments the Respondent No. 1 requested that the Appeal should be dismissed with exemplary cost. Findings 76. We note from the sequence of events that the Appellant has lent Rs. 1 Lakh when CIRP of the Corporate Debtor was almost imminent. We note that by giving a loan of Rs. 1 Lakh, the Appellant became Unsecured Financial Creditor and on inviting of claims from the Creditors by Erstwhile IRP, the Appellant filed claims for Rs. 1,05,877/- which barely meets the threshold of minimum Rs. 1 Lakh prevalent at that time. 77. We put a direct query to the Appellant regarding nature of his business and whether he has been involved in giving such loans to other parties and particularly how many such loans were given to the Corporate Debtor prior to this loan. The Appellant submitted that he is in a construction business and working as Real Estate Developer and not in financial business but in given circumstances he decided to give Rs. 1 Lakh loan to the Corporate Debtor which was legal for him to do so. The Appellant did ....
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.... to our notice by the Respondent No. 1 that the alleged loan agreement was backdated and unstamped documents. 81. It is interesting to note that value of the said transaction is of Rs. 1 Lakh vis-à-vis the stand of solvency of the Corporate Debtor, having reserves of more than Rs. 7 Crores and failure on the part of the corporate debtor to pay back Rs 1 lakh to Appellant when the said amount was never disputed. These circumstances lead us to belief that the Appellant was brought into CIRP so that the committee of creditor could comprise of only Unsecured financial creditor and the CIRP could be stage- managed as per desires. In this context, we reiterate that the forensic auditor in its report had observed that loan agreement was prepared on stamp paper dated May 2019 of Rs 100 for purpose of affidavit only and not for the purpose of obtaining loan and stamp paper was even prior to the Board resolution. It has been brought to our notice that as per Maharashtra stamp Act, stamp duty of 0.2% of the amount agreed in the contract gets attracted if amount exceeds 10 lakhs which in the present case was Rs 50 lakhs, which obviously was not paid. 82. We take into consideration....
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.... all costs. The Appellant submitted that in the work order, it was clear that time was essence of the work and the work was to be completed by March, 2015 which the Respondent No. 1 miserably failed to complete. Thereafter, the Corporate Debtor and the Respondent No. 1 entered into the MoU dated 25.09.2015 where it was agreed that the Respondent No. 1 would complete the work on or before 10.10.2015 and would be entitled only for payment of Rs. 5 Lakhs for completing the work. 90. According to the Appellant, it is admitted fact that the Respondent No. 1 could not complete the work even withing the extended time. 91. The Appellant submitted that based on the MoU signed by both the parties, on 25.09.2015 the Respondent No 1 was entitled to receive only Rs. 5 Lakh in full and final settlement from the Corporate Debtor and assailed the conduct of the Respondent No. 1 who created false and record and fabricated documents in order to demand further amount from the Corporate Debtor. 92. The Appellant reiterated that there were pre-existing disputes and MoU was signed on 25.09.2015, thus the demand notice under Section 8 was illegal and the same was replied accordingly. 93. The ....
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.... The Appellant castigated the conduct of the Respondent No. 1 who is unnecessary dragging the Corporate Debtor into insolvency and litigation. 100. The Appellant also defended the action of Respondent No. 6 for rejection of claims filed by the Respondent No. 1 since the Respondent No. 1 has not given the required documentations specifying claims of the Respondent No. 1 despite several opportunities given to him by the Respondent No. 6. 101. The Appellant assailed the conduct of the Respondent No. 1 who has been playing fraud on the Corporate Debtor based on fabricated documents in order to justify his false claims. The Appellant further submitted that the Respondent No. 1 fabricated document based on which certain payment was made by the Corporate Debtor to the Operational Creditor and referred to cube testing reports which are used to determine crushing strength of the concrete tubes utilised by the Corporate Debtor in the present project and even cube test reports were found to be fabricated. 102. The Appellant also assailed the Impugned Order which has ignored the several vital facts including that the debt was not due and there was no default. The Appellant also raised....
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....hest level and thus by doctrine of res-judicata the appeal is deserves to be dismissed with cost. 110. The Respondent No. 1 also denied the averments made by the Appellant that the Respondent No. 1 has been indulging into fabrication and forging documents and also denied the fact that the Appellant allegedly got the RTI information from relevant authorities regarding cube testing report and stated that they are manipulated and fabricated by the Appellant since validity of such information kept by the relevant authority is for 5 years. 111. The Respondent No. 1 submitted that based on these cube test report which was accepted by the Corporate Debtor and the Corporate Debtor got the payments from other agencies hence plea of fabricated cube testing report is only after thought at this stage to somehow mislead this Appellate Tribunal raising such frivolous issues regarding alleged fabrication and forgery. 112. The Respondent No. 1 reiterated the ploy of the Appellant in connivance that the Paton Constructions Pvt. Ltd. alleged Unsecured Financial Creditor for mere amount of Rs. 1,05,877/- and in connivance that the Resolution Professional Manish Jaju is deny the admitted clai....