TaxTMI 
TaxTMI 
2025 (8) TMI 1354
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....noticed for deciding the Appeal are: (i) A Section 7 application has been filed by SREI Equipment Finance Ltd. against the Corporate Debtor ("CD") - Kitply Industries Ltd., on which CP(IB)/8/GB/2024 has been registered. The CD - Kitply Industries Ltd. was admitted to Corporate Insolvency Resolution Process ("CIRP") by an order dated 01.05.2018 passed in company petition filed by IDBI Bank Ltd., in which CIRP a Resolution Plan was approved. (ii) Kitply Industries Ltd. - CD was taken over by one Plytinum Marketing Ltd. through Special Purpose Vehicle formed and owned by SREI Multiple Asset Investment Trust. The CD after having taken over by Plytinum Marketing Ltd. is alleged to have taken financial facilities from Respondent No.1 - SREI Equipment Finance Ltd. and SREI Equipment Finance Ltd. has alleged default against Respondent No.2 in Section 7 application. SREI Equipment Finance Ltd. - Respondent No.1 itself underwent CIRP and a Resolution Plan proposed by National Asset Reconstruction Ltd. ("NARCL") was approved on 11.08.2023. (iii) In SREI Equipment Finance Ltd. an Administrator was appointed by the Reserve Bank of India ("RBI"). The Administrator file....
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...., it is necessary by Adjudicating Authority to consider the application, if allegations of malicious and fraudulent initiation has been made. The Adjudicating Authority committed error in holding that in Section 7 proceedings, necessary parties to be heard are limited to the Financial Creditor and CD. Third parties do not possess any locus to be heard at the preliminary stage. The Adjudicating Authority further held that allegations under Section 65 relating to fraudulent and malicious initiation must be raised, if at all by the CD, through its authorized representative. The Adjudicating Authority held that Appellant, who is workmen through CD, neither proper nor necessary party for want of locus standi in the case. It is submitted that Adjudicating Authority took completely erroneous view of the matter in refusing to adjudicate the application filed by the Appellant under Section 65. The Adjudicating Authority erroneously distinguished the judgment of the Hon'ble Supreme Court in Beacon Trusteeship Ltd. vs. Earthcon Infracon Pvt. Ltd. & Anr. - (2020) SCC OnLine SC 1233 and other cases relied by the Appellant. Shri Krishnendu Dutta further submits that Administrator of Respondent N....
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....cy resolution process that may be initiated therein shall seriously affect the Applicants. The Applicants have locus to intervene in the Section 7 Petition and deserve to be heard before further Orders are passed therein." 8. Under the heading facts of the case, the Applicant has pleaded the relevant facts for consideration. Referring to earlier CIRP against the CD in paragraphs-10, 16, 17, 18 and 19, following have been pleaded: "10. Ultimately the resolution plan proposed by SREI VIF was approved by this Hon'ble Tribunal by Order dated December 7, 2018. SREI VIF incorporated a 100% owned Special Purpose Vehicle in the name and style of Plytinum Marketing Private Limited ("Plytinum") for taking over the 100% share capital of Kitply under the Resolution Plan. 16. Further, Plytinum, acting on the instructions and control of Trinity, appears to have caused the approval/sanction of ostensible financial assistance to Kitply from SEFL and SIFL for a limit of Rs. 130 Crore and Rs.120 Crore respectively. 17. Upon directions of Trinity, Kitply appears to have allegedly withdrawn a total sum of Rs.96.27 Crore from SEFL and Rs.81.65 Crore from SIFL, both of ....
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....s, power of attorney, which contained the signatures of 129 workers, on whose behalf the application is stated to be filed. In the impugned order, the Adjudicating Authority in the very first paragraph has noted that application is under Section 60, sub-section (5) read with Rule 11 of NCLT Rules, 2016. In paragraph-1 of the impugned order, prayers made in the Intervention Application have also been noticed. It is useful to note paragraph 1 of the order, which is as follows: "1. The present Intervention Petition has been filed by the Petitioners under Section 60(5) of Insolvency and Bankruptcy Code, 2016 ("Code") read with Rule 11 of NCLT Rules, 2016 seeking the following reliefs: a) CP(IB)/8/GB/2024 be dismissed in limine, b) Penalty of Rs. 1 Crore be imposed on the Respondent No. 1 in the instant Application, for fraudulently filing the collusive section 7 petition against Kitply; c) Issue notice to the Reserve Bank of India before proceeding any further with the hearing of CP(IB)/8/GB/2024 d) Stay of further proceedings in CP(IB)/8/GB/2024 till the disposal of the instant Application; e) The Applicants be permitted to interve....
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....le NCLAT in Deb Kumar Mujumdar Vs. State Bank of India Company Appeal (AT) (Ins.) No. 44/2018 wherein it was held that at the stage of admission of an application under Section 7 of the IBC, only the Corporate Debtor is entitled to be heard, and no other financial or operational creditor has a right to intervene or be heard. 13. It is a settled position that at the stage of admission of a petition under Section 7 or Section 9 of the Code, the necessary parties to be heard are limited to the Financial Creditor and the Corporate Debtor. Third parties, including intervenors, do not possess any locus to be heard at this preliminary stage. Allegations under Section 65 of the Code, relating to fraudulent or malicious initiation of proceedings, must be raised, if at all, by the Corporate Debtor through its authorised representative. Entertaining multiple representations in such proceedings would defeat the objective of a time-bound insolvency resolution framework, as the transactions in question are between the Corporate Debtor and the Financial Creditor. 14. Therefore, the Petitioners, who are workmen to the Respondent no. 2 are neither the proper nor the necessary part....
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.... Global Private Limited vs. Punjab National Bank & Ors. - Company Appeal (AT)(Insolvency) No. 81 of 2017". In the aforesaid background while we do not allow the appellants to oppose or support the application at the stage of admission, direct the Adjudicating Authority to decide the matter taking into consideration the fact brought by the appellant to its notice to find out whether a winding up proceedings has already been initiated against the 'corporate debtor' or not. If so required, the State Bank of India and M/s. Tantia Construction Limited should be asked to clarify the same. If the appellants are aggrieved by the order passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, in such case, the appellants will challenge the same before this Appellate Tribunal and raise all the issues as raised in this appeal. The appeal stands disposed of with the aforesaid directions and observations. No cost." 17. The present is a case where application was filed under Section 65 of the IBC alleging fraudulent and malicious intent for initiation of Section 7 application. The Applicants were not only seeking intervention in Section 7 application but pr....
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....ays that if any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for resolution of Insolvency or liquidation, as the case may, the Adjudicating Authority may impose a penalty. 39. Thus, it is clear that the Adjudicating Authority should be very cautious in admitting the Application so that Corporate Debtor cannot be dragged into Corporate Insolvency Resolution Process with mala fide for any purpose other than the resolution of the Insolvency. Therefore, to protect the Corporate Debtor from the mala fide Initiation of CIRP, the law has provided a penalty under sections 65 and 75 of the Code. Before admitting the Application, every precaution is necessary to be exercised so that the insolvency process is not misused for any other purposes other than the resolution of Insolvency." 19. Another judgment of this Tribunal, which has been relied by learned Counsel for the Appellant is in Company Appeal (AT) (Ins.) No.1406 of 2023 in Devashree Developers Pvt. Ltd. & Ors. vs. Aravali Cylinders Pvt. Ltd., where this Tribunal held that application under Section 65 is maintainable after fil....
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....justice and would have allowed the Appellant to substantiate its allegation regarding ground as pleaded in IA No. 739(ND)/2021." 22. There are other judgments relied by learned Counsel for the Appellant, where same proposition has been laid down, which needs no repetition. 23. Learned Counsel appearing for Respondent No.1 has placed reliance on judgment of this tribunal in Company Appeal (AT) (Ins.) No. 228 of 2021 in Dharam Vir Malhotra vs. M/s Kaur Sain Spinners Ltd. & Anr., which was a case where intervention was sought in Section 7 proceedings initiated by Central Bank of India against the CD. The application was rejected, against which an Appeal was filed, which too was dismissed. It is useful to notice paragraph 15 of the judgment, where following was held by this Tribunal: "15. After hearing the parties and going through the pleadings made on behalf of the parties, we observe that the application under Section 7 by a Financial Creditor against the Corporate Debtor was pending for consideration and for admission and in the meanwhile, the Appellants are seeking intervention, not on the ground that the Corporate Debtor defaulted in payment of amounts to them, but....
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....t of money is not an issue raised. The filing of Section 7 application by the Administrator of SEFL was on the basis that loan was sanctioned and in pursuance of the loan amount was disbursed. Copy of the Statement of Account was also filed along with the Section 7 application which also indicate that amount was disbursed. The observation made by the Hon'ble Supreme Court in Para 48 of the judgment in "Phoenix ARC Private Limited vs. Spade Financial Services Limited & Ors." that where a transaction is sham or collusive, it would only create an illusion that money has been disbursed to a borrower is not applicable in the present case. Present is a case where disbursal is not an issue. The question whether the loan transaction is fraudulent transaction within the meaning of Section 66 is engaging attention of the Adjudicating Authority in a separate application filed by Administrator of SEFL which needs no consideration or observation in the present proceeding. 11. The above facts makes it clear that the debt and default is not denied only by the Corporate Debtor but the Appellants also. We fail to see any valid ground on which Appellants can question order of Adjudicating A....