TaxTMI 
TaxTMI 
2025 (6) TMI 27
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....1833 of 2019 in CP (IB) No. 2295/MB/2018. By the impugned order, the Adjudicating Authority has allowed M.A. No. 1833 of 2019 filed by the Resolution Professional-Respondent No.1 and set aside certain transactions made by the Appellant and Respondent No.6 with Respondent Nos.2 to 5 and issued directions holding the Appellant and Respondent Nos. 2 to 6 to be jointly and severally liable for refunding the sums of money involved in the said transactions to the asset of the Corporate Debtor. The Adjudicating Authority has also directed that IBBI be kept informed for initiation of appropriate proceeding under Section 74(1) of IBC on the Appellant and Respondent No. 2 to 6 for having breached the moratorium provision. Aggrieved by the impugned order, the present appeal has been preferred by the Appellant- ex promoter of M/s. Sunil Hitech Engineering Ltd. 2. The brief facts in the present case which are necessary to be noticed for deciding the matter are as follows:- * M/s. Sunil Hitech Engineering Limited was admitted into Corporate Insolvency Resolution Process ('CIRP' in short) under Section 7 of IBC on 07.09.2018. The order admitting Section 7 application was pronounced by NCLT on ....
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.... transactions during 27.09.2018 to 10.11.2018. While admitting that these transactions did happen, it was contended that these transactions were routinely done in the course of ordinary business and not done for purposes of unjust enrichment or personal gain of the Appellant or with any other malafide intention. 4. Explaining the background of the impugned transactions, it was pointed out that Respondent Nos. 2 to 5 were long term service providers/vendors of the Corporate Debtor who were having an ongoing and continuing contract with the Corporate Debtor and therefore entitled to receive their dues for the goods and services provided by them. Since the IRP took time to take over the management of the Corporate Debtor which happened on 14.09.2018, had the Appellant and Respondent No.6 not cleared the outstanding dues of these four vendors, the running of the Corporate Debtor as a going concern would have run the risk of facing an abrupt halt. Since these payments were made to further the objective of the IBC of keeping the Corporate Debtor running as a going concern, the Adjudicating Authority could not have treated the transactions as not being in the ordinary course of business.....
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....endors/suppliers to whom payments had also been released but from whom refunds had not been sought. 7. Shri J. Rajesh, Ld. Advocate representing the Respondent No.1-RP rebutted the arguments canvassed by the Appellant to contend that the Appellant and Respondent No.6 had made these payments from the account of the Corporate Debtor after commencement of CIRP in contravention of Section 14(1)(b) of IBC which prohibits any payment to be made by the suspended management after commencement of CIRP. It was submitted that these payment transactions were made from the account of the Corporate Debtor in two phases. The first phase was between 10.09.2018 to 14.09.2018 and the second set of transactions occurred between 27.09.2018 to 10.10.2018. These transactions included the unauthorised payments made by the Appellant to Respondent Nos. 2 to 5 amounting to Rs 11.01 Cr. after commencement of CIRP. It was asserted that once the CIRP order is pronounced, the legal consequences flow from the date of pronouncement of such order. The operation of the order thus became effective from the date of pronouncement which took place on 07.09.2018 notwithstanding the fact that the order was uploaded on 1....
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....resolution professional. Section 14: Moratorium. 14. (1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely: - (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority; (b) transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein; (c) any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor. [Explanation.-For the purposes of this sub-section, it is hereby clarified that notwithstanding anything contained in any other law for the time being in f....
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....uthority on admission of a Section 7, 9 or 10 application is inter alia required to impose a moratorium for the purposes referred to in Section 14 and appoint an IRP. In terms of Section 14 of IBC, moratorium kicks into effect as soon as the Corporate Debtor is admitted into CIRP proceedings. In other words, moratorium becomes enforceable from the date the CIRP application is admitted or as indicated in the said order. The provisions of moratorium inter-alia provides for a stand-still period during which Financial or Operational creditors cannot resort to individual debt enforcement action in respect of debts which had accrued during the period prior to commencement of CIRP proceedings. Once moratorium has been declared upon the admission of Sections 7, 9 or 10 application, it is not open for any Financial or Operational creditor to recover any amount from the account of the Corporate Debtor except by filing claims through the resolution framework. A logical corollary that follows is that the suspended management of the Corporate Debtor is also strictly prohibited from directly or indirectly deploying the funds of the Corporate Debtor unilaterally, without the authorisation of IRP,....
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.... 138 of the Appeal Paper Book ("APB" in short). The second set of transactions which occurred between 27.09.2018 to 10.10.2018 amounted to Rs 6.80 Cr. as has been placed at page 139 of APB. These two sets of transactions aggregated to an amount of Rs 16.35 Cr. However, from out of these transactions, the RP had sought to set aside twelve payments only and these impugned transactions were made by the Appellant to Respondent Nos. 2 to 5 amounting to Rs 11.01 Cr. The rest of the payments amounting Rs 5.34 cr have been allowed as these were purportedly made towards workers dues, salaries, wages, statutory dues etc. 17. For sake of convenience, the impugned transactions made by the Appellant to Respondent Nos. 2 to 5 for which the RP had sought the directions of the Adjudicating Authority to be set aside is reflected in the chart of payments given below : S. No. Party Name Date of payment Mode Amount (INR) 1. Respondent No. 2 (DPRS Infra Developers Pvt. Ltd.) (total - 1,07,32,154/-) 06.10.2018 Cheque 1,07,32,154/- 2. Respondent No. 3 (Rayon Infrastructure Pvt. Ltd.) (total - 4,20,67,846/-) 06.10.2018 Cheque 2,22,67,846/- 08.10.2018 Cheque 1,98,00,000/- ....
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....nt and Respondent No.6 were authorised by IRP or not. In response, the IRP had clarified that all payments made by him had been duly approved by the CoC and all these CoC approved payments were disbursed by him only through the UCO Bank account. It is significant to note that the payments in the impugned transactions were made by Appellant and Respondent No. 6 not from UCO Bank account but from some HDFC Bank account of the Corporate Debtor. This clearly shows that the IRP had not authorised these payments. Moreover, we also notice that the Appellant had admittedly informed the IRP for the first time regarding these payments made to Respondent Nos. 2 to 5 only on 14.09.2018 which shows that the payments were prior to taking over of the charge of the Corporate Debtor by the IRP and therefore were done bereft of the prior permission or authorisation by the IRP. 21. Now that we have satisfied ourselves that the payments had been made unauthorisedly by the Appellant sans the prior approval of IRP, we also take notice from the material placed on record that the RP on 29.03.2019 wrote to the Appellant intimating that the impugned transactions were made after CIRP commencement and withou....
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....and Section 74 of the IBC. I have neither committed any act of fraud or concealment of property nor have I contravened the moratorium. I. In light of the aforesaid facts, I submit that I have not committed any violation of the IBC and the Admission Order and therefore request you to not initiate any proceeding against me in the NCLT as any such action against me is unfair and is totally unwarranted. Also, I hereby request you to have a meeting with me anytime next week as may be convenient to you, which may be communicated to me, to explore the possibility of amicably resolving the matter. Sunil Ratnakar Gutte Promoter, Sunil Hitech Engineers Limited" (Emphasis supplied) 22. Perusal of the above letter shows that that the Appellant has not denied having made these RTGS and cheque payments to Respondent Nos. 2 to 5. There is no averment contained therein that these payments had either been authorised by the IRP. The ostensible reason attributed for making these payments was that these payments were made in the ordinary course of business to run the day to day affairs of the Corporate Debtor as a going concern and had been made before IRP could take charge. The other ground ....
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....xpress provision contained in the IBC statute and cannot raise grounds of exception to the applicability of Section 14(1)(b) of IBC. Merely by advocating the criticality of clearing payments in the ordinary course of business to make the Corporate Debtor continue running as a going concern cannot constitute sufficient mitigating circumstances for not giving effect to the statutory provisions of moratorium as contained in Section 14. Once declaration of moratorium after admission of the Section 7 has been made, the said declaration cannot be seen as one which can be suspended or made inoperative or kept in abeyance for any reason including that of equity. The question of intent and motive behind allowing the impugned transactions is irrelevant and immaterial in view of the clear language of the statutory provision of Section 14 prohibiting such a payment after commencement of CIRP and declaration of moratorium. We have no doubts in our minds that the suspended management has to work within the confines of the IBC framework. 26. Any action contrary to the provisions of moratorium would vitiate the resolution process of the Corporate Debtor and thereby render itself illegal and perve....
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....A(AT)(Ins.) No. 1309 of 2013 to contend that the date on which the cheque is handed over is the relevant date and the payment shall be treated to have been made on that date. It is also the case of the Appellant that the onus to explain why these cheques were encashed after moratorium is not on them but on the recipients. It has not escaped our attention that the Adjudicating Authority in the impugned order has already distinguished the facts of the present case with the Pratim Bayal judgment supra and held it to be inapplicable. We are inclined to agree with the Adjudicating Authority that this judgment does not apply to the present case since the Appellant has not provided any substantive evidence on record to show that the cheques were handed over on the same date as was recorded on the cheque. 29. We also find force in the contention of the Respondent that since the cheques were encashed after 10.09.2018 by which date the moratorium had become effective, it amounted to breach of moratorium. In support of their contention, the Respondent has relied on judgment of this Tribunal in SREI Equipment Finance Ltd. Vs Amit Gupta in CA(AT)(Ins.) No. 298 of 2019 wherein it has been held ....