TaxTMI 
TaxTMI 
2024 (1) TMI 1322
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....ies to the tune of Rs.387.48 lakhs and direct the respondents 1 to 3 under sections 43 and 66(2) to contribute the funds to the extent of Rs.387.48 lakhs to the assets of the Corporate Debtor; (b) Order for the recovery of amounts payable towards the electronic appliances and direct the respondents 1 and 2 under sections 43 and 66(2) to contribute the funds to the extent of Rs.5,07,358/- to the assets of the Corporate Debtor; (c) Order for the recovery of amounts payable towards the two wheelers and direct the respondents 1 and 2 under sections 43 and 66(2) to contribute the funds to the extent of Rs.68,445/- to the assets of the Corporate Debtor; (d) Order for the recovery of amounts of motor vehicles and direct the respondents 1 and 2/ directors of the Corporate Debtor company to contribute the funds to the extent of Rs.13,74,585/- for the book value of Innova Crysta, under section 66(1);" The Applicant : The applicant herein is the Resolutions Professional of ICOAT Projects Private Limited/ Corporate Debtor. He was appointed as IRP by this Tribunal vide order dated 23.03.2022 in CP (IB) No.157/9/HDB/2021, and later appointed as Resolutions Profes....
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.... Members of the Board of Directors. Final observations of the Transaction Auditor are as under: (1) Section 43: Preferential Transactions. Transaction Auditor conclusion: There were payments to related parties on which there is no clarity on the nature and purpose of payments and which may amount to mis-utilization of funds and preferential payments over other financial and operational creditors. As regards creditor's payments and adjustments with other receivables we are unable to comment whether the amounts are paid actually or just settled the transactions as per the convenience of the company. We have not identified any Preferential Transaction under section 43 of IBC where as we have noticed some preferential payments as mentioned above. (2) Section 45: Undervalued Transactions. Conclusion: There is no evidence to show any undervalued transactions. (3) Section 50 : Extortionate credit transactions. Conclusion: There is no extortionate credit transactions. (4) Section 66 : Fraudulent trading or wrongful trading transaction. Auditor's conclusion: The company appears to be involved in fraudu....
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.... 320.68 0.00 Remarks: I) Balances with (-) denote that amount is debt owed by the Corporate Debtor to the entity concerned. Other wise they are assets to the Corporate Debtor. II) No funds outflow is discernible Transactions under the Financial Year 2021-22: (Rs in lakhs) No. Name of the unit Opening balance of Asset to the CD as 31.03.2021 Transactions during the period Balance Asset Ought to be as on 31.03.2022 Balance of Asset Shown in the Books after internal transfers (Unaudited) Difference Debit Credit 1 Lorven Infra 320.68 0.00 0.00 320.68 0.00 320.68 2 Shuklaam Exim Ltd. 0.00 320.22 253.41 66.81 0.00 66.81 3 Padma Electricals 0.00 0.00 0.00 0.00 0.00 0.00 4 ICity Constructions 0.00 212.78 656.34 -443.56 -56.07 -387.49 TOTAL 320.68 533.00 909.75 ....
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....e of the operational creditors of the Corporate Debtor, there by attracting section 43(2) of the IBC. 2.8 That respondents no.1 and 2 knew that there was no reasonable prospect of avoiding commencement of CIRP of ICOAT Projects Pvt Ltd. Hence they did not exercise due diligence in minimizing potential loss to the creditors of the Corporate Debtor and indulged in transactions set forth u/s 43 of IBC. 2.9 That this Tribunal had issued notices to the Corporate Debtor while adjudicating CP (IB) No.157/9/HDB/2021. However, said notice were returned with remark, "unclaimed. Returned to sender". This Tribunal deemed the same as deemed service and treated the Corporate Debtor ex parte. Hence the applicant submits that the directors knew about commencement of CIRP. Hence the above transactions come under the ambit of section 66(2) of IBC, 2016. Said section is reproduced hereunder: "66. Fraudulent trading or wrongful trading. - (1) If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpos....
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.... favour ICity Constructions, which put other creditors at a disadvantageous position. The said transactions are : * The transactions are Preferential transactions coming under the ambit of section 43 of the IBC, 2016; and * The transactions are post-initiation of CIRP coming under the ambit of section 66(2) of the IBC, 2016. 2.12 The applicant submits that unaudited financial statements of the Corporate Debtor show the following on its books as on 31.03.2022. However, when the RP approached RTA Office, status of the vehicles is revealed otherwise. The same is described as under: Sl. No. Description of vehicle Date of acquisition Purchase value in Rs. Book value in Rs. Status as on date 1. Mahindra Car 25.08.12 2,20,000 Zero -- 2. Bajaj Splendor bike 20.08.12 20,000 1,739 Members of suspended Board claim that vehicles were sold by Suresh Kumar (late husband of R/1) and formalities of such sale were not completed. 3. Bajaj Discover bike 08.10.13 29,000 5,647 4. Bajaj Discover bike 30.06.15 59,100 19,795 5. Maruti Dezire car 01.07.25 6,40,179 2,14,460 RTA record s....
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....eport submitted by him cannot be taken into consideration. Paar III (5) : Transaction Auditor upon reviewing statement of accounts had provided Report dated 03.09.2022. Appointment of Transaction Auditor is not in accordance with law. Submission of Report is delay for want of information from suspended Members of Board is incorrect. RP has access to all the documents as RP has taken over the Corporate Debtor. As per Regulation 35A of IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, RP shall from an opinion on transactions and shall bring to knowledge of this Tribunal. Besides this IA is time-barred. The applicant did not explain delay. Unless delay is condoned this IA cannot be filed. Para III (7) : RP upon verifying Transaction Audit Report .... Since 01.04.2020 there were number of unexplained transactions .. .. Said transactions were made by the Corporate Debtor during the course of its business, which is reflected in Books of Account. The respondents do not have Books of Account subsequent appointment of RP. Para III (8), (10) and (11) : Suspended Board of Directors of ICOAT Project Pvt Ltd have conducted various preferential transact....
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.... of Rs.387.48 lacs to the credit of ICity Constructions. Said transactions are bona fide. Respondents contend that audit conducted by Transaction Auditor is not in accordance with law. As such Report submitted by Transaction Auditor does not have credibility; therefore, the respondents ask for a fresh audit by another auditor. Transactions done with R/3 are bona fide ones. Merely because proprietor of R/3 was an ex-Director of Corporate Debtor, the Corporate Debtor is not barred from having business relationship with R/3. Such allegations are based on assumptions. Para III (18) to (23) : On scrutiny of unaudited statements of Corporate Debtor, it is observed that the Corporate Debtor / company was holding vehicles (as listed in para no.III(18). .. .. Furthermore, in the books of the Corporate Debtor/ company, there are various computers/ laptops on record, whose book value is Rs.5,07,358/-. .. ... Respondents no.1 and 2 have never indulged in any preferential or fraudulent transactions as alleged by the applicant. Audit conducted by Transaction Auditor is not in accordance with law. Such audit does not have credibility. Therefore, the respondents request for a fresh audit to ....
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....ew value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest, and was used by corporate debtor to acquire such property; and (ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property: Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor." Fraudulent trading or wrongful trading. - "66. (1). If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit. (2) On an application made by a resolution pro....
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....a third person, named Potuluri Rajasekhar vide No Objection Certificate (NOC) dated 26.05.2022, viz post commencement of Corporate Insolvency Resolution Process (CIRP). Therefore, the applicant vehemently submitted that these transactions are covered under section 66 of the IBC, 2016. The applicant further submitted that that there some computers, laptops, etc. book value of which is Rs.5,07,358/-, which are also not tabulated on record. The respondents contended that at the outset this application is time-barred as it has not been filed within 135 days after commencement order of CIRP. The respondents on one hand contended that the Transaction Auditor has concluded that there is no Preferential Transaction under section 43 of the IBC, 2016, and on the other hand in para III (8) the applicant has alleged that such claims are contradictory. Our findings : 10. We find that the applicant has given details of some transactions claiming that the respondents have siphoned off the total amount of Rs.3.87 crores. Therefore, these transactions of siphoning off the money and performing these transactions are not submitted in the application. This application was listed for orders on 11....