TaxTMI 
TaxTMI 
2025 (9) TMI 549
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..... The project comprised 17 towers with 2,384 units, originally scheduled for completion in 2013. However, construction remained incomplete in several towers. On 20.10.2020, Respondent No. 1 entered into an agreement with the Appellant, Expert Realty Professionals Pvt. Ltd., under which a total built-up area of 1,37,918 sq. ft. was agreed to be sold under a buy-back arrangement. Pursuant to this, the Appellant infused Rs. 15 crore between October 2020 and February 2021 through banking channels. This investment facilitated further construction activity at the project site. Subsequently, a sum of Rs. 12,88,04,535/- became due and payable to the Appellant, and the minutes dated 15.12.2021 recorded the parties' mutual understanding regarding the same. Owing to non-payment of the said amount, the Appellant filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 before the Hon'ble NCLT, which was registered as CP(IB) No. 237/2023. 3. During the pendency of the proceedings, an objection was raised by a homebuyer association (Logix Blossom County Apartment Owners Association) by filing an interlocutory application being IA No. P26 of 2023 alleging collusion between t....
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....t to attract Section 65. The IBC disqualifies related parties from being part of the CoC (Section 21(2)) and from submitting a resolution plan (Section 29A), but nowhere equates related party status with fraud or malice. It is therefore submitted that the impugned order proceeds on an erroneous interpretation of law, in the absence of any substantive evidence or pleading under Section 65, and deserves to be set aside. Submissions of R2 and R3 9. That the sole purpose behind the filing of the fraudulent, malicious and concocted insolvency application by the Appellant against the Corporate Debtor was to evade the Corporate Debtor's obligations towards the Noida Authority, liabilities towards genuine homebuyers who have been granted compensation/refund of their investment as per UP RERA and Consumer Forum and derail in the registration process of the apartments allotted to the genuine homebuyers. All the units of the project of the Corporate Debtor were sold to all the allottees and the payment towards the same had already been made to the Corporate Debtor, thereby confirming that the Corporate Debtor had recovered all the funds as planned against the said project. However, the ....
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....rties at the time of execution of the MoU and other related documents. Recent judicial pronouncements, including those affirmed by the Hon'ble Supreme Court, hold that any attempt to sever such a relationship solely to circumvent the provisions of the Code is impermissible. 15. It was argued that the non-disclosure of the related party status was deliberate and formed part of a larger scheme to misuse the CIRP process. The Adjudicating Authority was, therefore, justified in piercing the corporate veil to reveal the real intent behind the initiation of proceedings, which was found to be collusive and aimed at defeating the rights of other creditors. 16. The Respondent submits that key individuals the FC and CD, being partners in an LLP, remained connected throughout, and actively participated in the Committee of Creditors (CoC) despite being ineligible, holding a significant voting share of 21%. 17. Adjudicating Authority, while lifting the Corporate Veil of the Corporate Debtor for unearthing such fraudulent and malicious transaction, took note of the fact that neither the MoU dated 20.10.2020 nor the alleged minutes dated 15.12.2021 wherein the Corporate Debtor has undert....
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....y that the appeal be dismissed with exemplary costs, being a clear abuse of the process intended to mislead the Tribunal and waste its valuable time. Appraisal 23. Heard the counsels of both sides and also perused the material placed on record. 24. We note that this Tribunal had on 05.03.2025 ordered as follows: "Issue notice. Learned counsel for the Resolution Professional is present and accepts notice. Learned counsel for the Respondent No.2 and 3 also accept notice. No notice needs to be issued. Let Reply be filed by the Respondents within two weeks. Rejoinder be filed within two weeks thereafter. List this Appeal on 17.04.2025 for admission/disposal. In the meantime, penalty of Rs.55 Lakhs imposed on the Appellant shall remain stayed. In the meantime, no third party rights shall be created in the assets of the Corporate Debtor." 25. Main issue before us is whether NCLT correctly identified financial debt to be fraudulent and malicious and misjudged or not while observing collusion and whether order for recall of the Section 7 proceedings is maintainable or not. 26. We first look into as to how and in what circumstances the section 7 proceedings in the pr....
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.... and all material particulars relating to the financial debt arising from the commercial transaction between the parties were set out in Part IV of the said application. We now look into the circumstances under which the financing arrangements were worked out, which ultimately led to Section 7 proceedings against the CD M/s. Logix. Binding understanding of 20.10.2020 30. One of the main planks of the Appeal is the binding understanding between FC - Expert Realty and CD - Logix Infrastructure Private Limited which is dated 20.10.2020 which is extracted as below: 31. Perusal of binding understanding as reproduced above herein shows that this is an unregistered agreement and the common thread in this MOU is Mr Hemant Sharma, Director of CD-Logix, who is also director in another LLP- New Greens Landkart wherein Mr Niraj Gusian, the Director of FC is also a Director. So as per Section 5(24) both FC and CD are related parties. Further this is an 'MoU' / Agreement for the sale of 1,37,918 sq. ft, of built-up area in the Logix Blossom Country project, Sector 137, Noida, under a buy-back arrangement, with the Appellant infusing about Rs. 15 crores between 20.10.2020 and 09.02.2021,....
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....ifty Five Thousand Three Hundred Eighty-Five Only) (Principle Amount alongwith 18% interest, along with further interest at the contracted rate till the date of actual payment of the entire Amount) BRIEF DETAILS OF THE TRANSACTION ARE AS UNDER: 1. That the Expert Realty Professional Pvt. Ltd (herein referred as "Financial Creditor") is into Real Estate Consultancy, Development and Construction and had entered into a business transaction with Logix Infrastructure Pvt. Ltd. (herein referred as "Corporate debtor") regarding the purchase of 1,37,918 square feet of area in the project namely Logix Blossom County at Sector 137 Noida, U.P. Accordingly the Expert Realty Professional Pvt. Ltd (herein referred as "Financial Creditor") admitted into MOU (Binding Understanding) dated 20th October, 2020 with Logix Infrastructure Pvt. Ltd. (herein referred as "Corporate debtor). Copy of said MOU is being annexed herewith as Annexure A-3. 2. That Petitioner had agreed to invest in the said project at Rs. 2200/- per square feet and respondent had consented to transfer the sale proceeds over and above the said price of Rs. 2200 /- for the aforesaid area by way of return on investments m....
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....ligation and thus the present petition is required to be admitted against the corporate debtor. Date from which such date debt fell due. 15.01.2025 Amount claimed to be in default and the date on which the default occurred (Attach the workings for computation of amount and days of default in tabular form The total amount claims to be in default is Rs.12,88,04,535/- along with 18% interest p.a. payable on unpaid debt with effect from 15.01.2022 till realisation. 35. Perusal of particulars of debt in Part-IV of Section 7 Application (@189), indicates that as per MOU dated 20.10.2020 initially around Rs. 15 Crs was invested by the Appellant in the project and Respondent had consented to transfer the sale proceeds over and above the said price of Rs. 2200/- for the aforesaid qua by way of return on investments made by the applicant in the project. Advances were made for Rs. 15 Crs. by the Applicant - FC-Expert. 36. But later on, as per decision taken on 15.12.2021 by the two parties, Respondent acknowledged their liability towards the applicant to the tune of Rs. 12.88 Crs. (Approx) payable without interest within a period of one month and thereafter @ 18% p....
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....diary of a holding company to which the corporate debtor is a subsidiary; (j) any person who controls more than twenty per cent. of voting rights in the corporate debtor on account of ownership or a voting agreement; (k) any person in whom the corporate debtor controls more than twenty per cent. of voting rights on account of ownership or a voting agreement; (l) any person who can control the composition of the board of directors or corresponding governing body of the corporate debtor; (m) any person who is associated with the corporate debtor on account of-- (i) participation in policy making processes of the corporate debtor; or (ii) having more than two directors in common between the corporate debtor and such person; or (iii) interchange of managerial personnel between the corporate debtor and such person; or (iv) provision of essential technical information to, or from, the corporate debtor;" 39. Appellant claims that Mr. Hemant Sharma served as an Additional Director with FC - Expert Realty from 12.05.2020 till 05.09.2020, i.e. for less than 4 months. He subsequently became a Director in the CD - Logix....
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....CD. In any case MCA records @1149 APB confirm that. 41. Mr. Hemant Sharma, Director of CD-Logix, who is also director in another LLP- New Greens Landkart wherein Mr Niraj Gusian, the Director of FC is also a Director. So as per Section 5(24) both FC and CD are related parties. We thus find that Hemant Sharma and Neeraj Gusain are related parties in terms of Section 5(24)(a) read with Section 5(24A) (b) and Section 5(24)(m)(iii). Financial statements 42. We now see whether the financial statements of the parties throw any light on the perpetuation of fraudulent CIRP Proceedings. We note that the Appellant-Financial Creditor-Expert in its balance sheet as on 31.03.2021 reflected the disbursement as 'Current Investments' (@1270, @1278). Neeraj Gussain, Appellant-Financial Creditor-Expert was having 50% shareholding. On the other hand, as per MOU/ Binding Understanding dated 20.10.2020, alleged debt is reflected as the advance against the sale of property. 43. Further perusal of the financial statements of FC-Expert Realty reveals that Liability of the CD-Logix, which was Rs. 21.16 crs as on 31.03.2021 has come down to 'NIL' on 31.03.2022 (@1278 and 1286, 1292 APB). It is a....
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....ode. Being aware of the same they deliberately did not disclose the clear facts of the case to the Adjudicating Authority and participated in the CoC. Therefore, the Adjudicating Authority is fully empowered to pierce the corporate veil and examine the real intent behind the filing, and it rightly did the same. In present case we note that Mr. Neeraj and Mr. Hemant are the one who weaved the web and were related party throughout the process being partner in the LLP. Furthermore, on piercing corporate veil, NCLT found Section 7 proceedings to be collusive or for extraneous purposes, such as to defeat the rights of other creditors and manipulate the insolvency process. 46. We cannot agree with the argument of the Appellant that the Application under Section 65 and impugned order was filed at the fag end of the CIRP and therefore it is not maintainable. We note that if there is fraud it will vitiate everything including order approving the resolution plan. Thus, the stage of CIRP is inconsequential, while considering the Section 65 application. Further, in the present case there is no resolution plan approved till date, even though FORM-G was issued way back on 14.10.2023. 47. W....
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....nancial Creditor, M/s. Experts Realty Professionals Private Limited has used this forum for purposes other than the insolvency resolution of the Corporate Debtor with purported malicious intent, contrary to the objectives of the IBC, 2016. xvii. Therefore, in view of our discussion, we have no hesitation in holding that the Financial Creditor has invoked the provisions of IBC against the Corporate Debtor with fraudulent, mala fide intention. xviii. We are therefore of the considered view that the Section 7 application bearing IB-237(ND)/2023 filed by the Financial Creditor is a collusive application filed, in collusion with the Corporate Debtor with an ulterior motive." 52. R2 and R3 has canvassed their case by placing reliance upon the following judgments: Ashmeet Singh Bhatia Vs. Pragati Impex India Private Limited & Anr. [NCLAT New Delhi; CA (AT) (Ins) No. 1413 of 2023]: ".... 16. The power under Section 65 of the Code can be exercised by the Adjudicating Authority only after satisfying that grounds as mentioned exist, if the Adjudicating Authority come to the conclusion that insolvency proceedings have been initiated fraudulently ....
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.... determination. Conclusions and Order 55. The Appeal is, therefore, dismissed. All IAs stand disposed. No orders as to costs. ============= Document 1 CONFIDENTIAL Binding Understanding The binding understanding agreement ("MOU") dated 20" October 2020 summarizes the principal terms with respect to the sums of INR 15.00,00.000/- (INR Fifteen Crores Only) advance to Logix Infrastructure Private Limited, a private limited company incorporated under the laws of Republic of India (CIN No. U72200DI.2008PTC172835) having its office at Logix Blossom County , GH-02, Sector 137, Noida - 201305 (the "Logix"), by Expert Realty Professionals Private Limited ( the "Expert") a private limited company incorporated under the laws of Republic of India (CIN No. U70101DL.2009PTC196962) having its office at C-31. G/F. Nathu Singh Market, Masoodpur, New Delhi-110070. Logix and Expert are collectively referred to as "Parties" and individually as "Party". The intent of the MOU (which is legally binding, except as expressly set for the herein) is to describe, the key terms of the proposed agreement amongst the Parties "(Proposed Transaction") 1. Transaction Company Logix Infrastr....
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....to register the property in their name. Thus post execution of the above POA. Expert shall be eligible to register the property on its own, without any assistance needed from Logix. However, registry can be done only when the entire consideration of INR 2,200 per sq. feet the unit has been paid to Logix (for unit being registered). Once INR 2,200 per sq. feet consideration has been paid to Logix for a particular unit, then Logix can under no condition object to any registration being undertaken by Expert for that particular unit. Terms of the POA to ensure that the above aspect is duly captured. (iii) The first blank transfer document to be given to Expert & the same would be free of charge. (iv) Amount of INR 15,00,00,000/-(INR Fifteen Crores Only) so received by Logix from Expert would be shown advance from customers in the books of Logix: (vi) Board resolution of the Logix accepting the MOU. (d) Other Commitments: Logix shall commit to provide all necessary support, to provide all required information and to complete the all required documentation on or before the closing date and thereafter as and when needed by Expert. Document 3 Expressway, Sector - 137, NoI ....
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.... paid back to Expert as repayment of earlier booking amount. b. Amount @ INR 1.600 per sq.ft would be paid as a premium on buy back. c. Amount @ INR 200 persq.ft would be charged as brokerage by Expert (inclusive of GST) d. So total amount to be paid to Expert would be amount @ INR 2,900 per.sq.ft 6. Payment of amount @ INR 1.100 per sq.ft. the balance amount would be paid directly by the customer to Logix as per the terms of the BBA. (i) Representations and warranties: The definitive agreement would include the standard representation and warranties from Logix, including but not limited to : 1. That there is no injunction or other legal bar on allotment of units; 2. That all information provided to Expert is materially correct and up to date and that nothing material has been withheld; 3. That Logix has no outstanding charge on its assets or assets of the share holders and that no litigations is pending or threatened that may materially impact the proposed transaction. () Confidentiality; The parties here to agree and acknowledge that any end all information disclosed pursuant to the purpose as contemplated under this MOU ("Confidential Information") shall ....