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TaxTMI 
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2025 (12) TMI 1476
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....ahul Dev, Mr. Arjun Amin, Ms. Avina Karnad and Ms. Nandini Kaushik, Advocates for R1/Liquidator. Mr. Pawan Reley, Mr. Akshay Lodhi, Mr. Tanish Rawat and Mr. Utkarsh, Advocates for R2, R3 and R4. JUDGMENT Ashok Bhushan, J. These two appeals have been filed challenging the same order dated 27.05.2025 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench - I in I.A. No.908 of 2023 in in C.P. (IB) No.760/MB/2021. Application I.A. No.908 of 2023 was filed by the Resolution Professional under Section 66 of the I&B Code praying for various reliefs. Appellants were Respondents in the above application. The Adjudicating Authority by the impugned order allowed the application. Aggrieved by the order dated 27.05.2025 these appeals have been filed. 2. Company Appeal (AT) (Ins.) No.959 of 2025 has been filed by the Appellants who were Respondent Nos.4, 5 and 6 in I.A. No.908 of 2023. In the appeal, Appellants have prayed for setting aside the order dated 27.05.2025 passed in I.A. No. 908 of 2023. 3. Company Appeal (AT) (Ins.) No.960 of 2025 has been filed by three Appellants who were Respondent Nos. 1, 2 and 3 in the I.A. No.908 of 2023. In the app....
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....tions LLP on 12.05.2021. A Leave and Licence Agreement was executed on 30.06.2021, leasing out one floor of the property to Aaj Ka Anand Publications LLP. On 03.08.2021, the Corporate Debtor and the LLP executed a Deed for Usage granting rights of tradename, trademark, brand name and plant and machinery for a consideration of Rs. 15 Lakhs. The LLP sold the products amounting to Rs. 1,37,34,660/-. 4.4 Section 7 application filed by the State Bank of India was admitted and Vinita Maheshwari was appointed as Resolution Professional. On 30.12.2022, the Resolution Professional filed an application I.A. No.908 of 2023 under Section 66 of the I&B Code praying for various reliefs. In the application filed by the Resolution Professional, notices were issued, reply was filed by Respondent No.4 - Aaj ka Anand Publications LLP and other Respondents. The Adjudicating Authority directed for liquidation and appointed a Liquidator vide order dated 12.04.2023. The Liquidator filed a Rejoinder Affidavit in I.A. No.908 of 2023. An Affidavit and Sur- rejoinder was also filed on behalf of Respondent No. 4, 5 and 6 in the application. An Additional Affidavit was filed by the Liquidator. Parties also ....
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....in Company Appeal (AT) (Ins.) No.959 of 2025 has also appeared for Respondents 2, 3 and 4 in Company Appeal (AT) (Ins.) No.960 of 2025. Submissions made on behalf of Aaj ka Anand Publications LLP, who are Appellants in Company Appeal (AT) (Ins.) No.959 of 2025 shall be referred as submissions of LLP whereas submission made on behalf of Appellants in Company Appeal (AT) (Ins.) No.960 of 2025 shall be referred as submissions of Suspended Directors and the submissions on behalf of the Liquidator shall be referred as submissions of Liquidator. 6. Learned counsel appearing for the LLP challenging the impugned order submits that the Adjudicating Authority committed error in quashing the Leave and License Agreement dated 30.06.2021 and the Deed of Usage dated 03.08.2021 whereas application I.A. No.908 of 2023 was filed only under Section 66-67 pf the I&B Code and in exercise of jurisdiction under Section 66-67, the Adjudicating Authority could not have cancelled the Leave and License Agreement and Deed of Usage. It is submitted that the Adjudicating Authority in the impugned order has also observed that the deeds cannot be cancelled in exercise of power under Section 66, however, the A....
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....r under Section 49 could not have been exercised by the Adjudicating Authority. There was no sufficient pleading to exercise power under Section 49. Direction to make contribution is also uncalled for. The Impugned order is nonspeaking. The ingredients of undervalued transaction were not made out. Personal liability could have been imposed only on the person of the Corporate Debtor involved in fraudulent trading and does not empower the Adjudicating Authority to impose liabilities on third parties. 8. Learned counsel appearing for the Suspended Director submits that the High Court of Bombay by order dated 23.04.2024 passed in a Writ Petition filed by the Liquidator has already directed the LLP to vacate the premises on or before 03.07.2024 and to pay arrears of rent. The premises having already been vacated by the LLP and possession handed over to Liquidator, the relief (c) claimed in the application has become infructuous. Learned counsel submitted that in so far as relief (d), direction for contribution of amount of Rs. 2,68,00,701/- is concerned, the said direction is unsustainable. It is submitted that direction at best has to confine to payment of electricity dues which was....
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....pose. The burden of proof squarely lies on the Resolution Professional and standard of proof is higher than a mere balance of probabilities. The ingredients of Section 66(2) were neither present nor proved. There was no knowledge of impeding insolvency. The titles of newspapers do not belong to the Corporate Debtor, which was registered in the name of Shyam Agarwal, father of the former Promoters and Directors of the Corporate Debtor. 10. Learned counsel for the Liquidator refuting the submissions of learned counsel for the Appellant submits that after issuance of notice under Section 13(2) on 08.09.2017, there was no authority in the Suspended Directors of the Corporate Debtor to grant any leave and license or hand over the assets of the Corporate Debtor to any third party. No prior permission of the Lenders was obtained to execute the Leave and License Agreement dated 30.06.2021 and Usage Deed dated 03.08.2021. The transaction dated 30.06.2021 and 03.08.2021 being void and non-est were also fraudulent transactions. Respondent Nos. 5 and 6 who were Promoter and Director of the Corporate Debtor resigned on 20.09.2020 and inducted their wives and son as Director of the Corporate ....
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....y that under the orders of the High Court of Bombay dated 24.04.2024, immovable assets of the Corporate Debtor as covered by Leave and License Agreement dated 30.06.2021 has already been handed over to the Liquidator. 11. Learned counsel for the both the parties have relied on judgments of this Tribunal and the Supreme Court which we shall refer to hereinafter. 12. We have considered the submissions of learned counsel for the parties and perused the record. 13. We need to first notice the prayers and certain pleadings in the application filed by the Resolution Professional. Application mentioned 'Application U/S 66 R/W 67 of Insolvency and Bankruptcy Code, 2016'. Under the heading III of the application, facts of the case have been given. In Para 4, 5, 6 and 7 following has been pleaded: "4. The applicant submits that SBI filed application for initiation of CIRP on 12.4.2021. After filing of the petition before the Hon'ble Adjudicating Authority, the suspended management of Corporate Debtor formed one Limited Liability Partnership (for short LLP) in the name of "Aaj Ka Anand Publications LLP on 12.5.2021. 5. The applicant submits that the Corporate De....
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....] That this Hon'ble Tribunal may be pleased to allow this application; [B] That this Hon'ble Tribunal may be pleased to pass appropriate orders/ directions, cancelling the Deed dated 3.8.2021 (Annexure-B) and further directing the respondents to forthwith return the entire business back to the Corporate Debtor including plant machinery, in the interest of justice; and [C] That this Hon'ble Tribunal may be pleased to pass appropriate orders/ directions, cancelling Leave and Licence Agreement dated 30.6.2021 (Annexure-E) executed between the Corporate Debtor and the Respondent no.4 and further be pleased to direct the Respondent no.4 to vacate the rented premises and hand over peaceful possession of the rented premises back to Corporate Debtor, in the interest of justice; [D] That this Hon'ble Tribunal may be pleased to pass appropriate orders/ directions in terms of Section 66 r/w. Section 67 of the IB Code against respondents to make contribution of Rs. 2,68,00,701/- (as referred in Para 9 to 11 of this application) for appropriate distribution amongst creditors of the Corporate Debtor, in the interest of justice; [E] That th....
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....gned from the Board of Directors on 02.09.2020 and appointed their immediate relatives as Directors on 07.09.2020. The Adjudicating Authority has returned finding that events clearly demonstrated that Respondent No. 5 and 6 has taken all actions to fraudulently transfer the assets of the Corporate Debtor and LLP has been only constituted on 12.05.2021, after filing of Section 7 application. The sequence of events clearly indicates and prove the fraudulent design of constituting LLP to take over the business of the Corporate Debtor. As noted above, notice under Section 13(2) was issued to the Corporate Debtor and its Promoters and Guarantors pm 08.09.2017. A copy of the notice has been brought on the record, which notice is addressed to the Corporate Debtor, the Guarantors and Mortgagers. It is useful to notice the initial part of the notice including subject, which is as follows: "BY REGISTERED POST WITH A.D. Ref No.:2095/SBILTOL/LEGAL/RRB/ST/2017-18 08th September, 2017 To, 1. Aaj Ka Anand Papers Limited 365/6 Shivaji Nagar, Aaj Ka Anand Building, Pune 411005 2. Mr. Shyam Gyaniram Agarwal (Guarantor and Mortgagor) H-501, 1 Modi Baug Co-operative Housing Soc....
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.... of his secured assets referred to in the notice, without prior written consent of the secured creditor." 20. Leave and License Agreement dated 30.06.2021 by which entire floor of the Corporate Debtor was rented out to the Respondent No.4 - LLP and Deed of Usage dated 03.08.2021 by which entire business of the Corporate Debtor was transferred to the LLP are in clear breach of the above statutory provision. 21. Learned counsel for the Respondent has relied on judgment of the Hon'ble Supreme Court in (2019) 2 SCC 198, Hindon Forge Private Limited & Anr. vs. State of Uttar Pradesh", where the Hon'ble Supreme Court has laid down that after Section 13(4) of the SARFAESI is invoked after issuance of notice under Section 13(2), Section 13(13) interdicts the borrower from transferring the secured assets. It is useful to notice Para 25 of the judgment: "25. When we come to Section 13(4)(a), what is clear is that the mode of taking possession of the secured assets of the borrower is specified by Rule 8. Under Section 38 of the Act, the Central Government may make rules to carry out the provisions of the Act. One such rule is Rule 8. Rule 8(1) makes it clear that "the authorise....
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....following: "32.1. However, we are impelled to make one comment as regards the application made by IRP. It is noticed that in the present case, the IRP moved one composite application purportedly under Sections 43, 45 and 66 of the Code while alleging that the transactions in question were preferential as also undervalued and fraudulent. In our view, in the scheme of the Code, the parameters and the requisite enquiries as also the consequences in relation to these aspects are different and such difference is explicit in the related provisions. As noticed, the question of intent is not involved in Section 43 and by virtue of legal fiction, upon existence of the given ingredients, a transaction is deemed to be of giving preference at a relevant time. However, whether a transaction is undervalued requires a different enquiry as per Sections 45 and 46 of the Code and significantly, such application can also be made by the creditor under Section 47 of the Code. The consequences of undervaluation are contained in Sections 48 and 49. Per Section 49, if the undervalued transaction is referable to sub-section (2) of Section 45, the adjudicating authority may look at the intent to ex....
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....43, 45, 50 and also under section 66, the Adjudicating Authority shall have to distinguish the same and decide as to which provision would be attracted to which of the applications, and then shall exercise the powers and pass orders in terms of the provisions of the IBC." 24. In the above case, the Hon'ble Supreme Court laid down that there is clear demarcation of powers of the Adjudicating Authority to pass orders in the avoidance applications filed by the Resolution Professional under Sections 43, 45 and 50 falling under Chapter III and the applications filed by the Resolution Professional in respect of the fraudulent and wrongful trading of the Corporate Debtor, under section 66 falling under Chapter VI of the IBC. 25. We have noticed above few of the contents of the application filed by the Resolution Professional. The application refers to an application under Section 66/67 of the I&B Code. Application neither in its heading nor in the body of the application even refers to Section 45, 46, 49 of the I&B Code. Apart from the pleading that business of the Corporate Debtor was transferred for meagre sum of Rs. 15 Lakhs, there is no other pleadings contained in the applicati....
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....e same only because a wrong provision has been mentioned. In a case of this nature, sub-section (2) of Section 14 of the Limitation Act per se may not be applicable, but, as indicated hereinbefore, the principles thereof would be applicable for the purpose of condonation of delay in terms of Section 5 thereof." 27. There can be no dispute to the proposition of law laid down by the Hon'ble Supreme Court in the above case. Non-mentioning of provisions of Section 44,45 and 49 may not be relevant, however, the pleading is essential ingredient which require to be proved for falling the transaction in above sections. Even if provision of Sections 44, 45 and 49 are not mentioned in the order, the Adjudicating Authority does not lack jurisdiction to exercise jurisdiction if there are sufficient pleadings and material on record. Present is a case where apart from application being not referred to be application under Section 44/45/46/47, there are no specific pleadings with respect to ingredients of above avoidance transactions. Learned counsel for the Suspended Director and LLP are right in their submission that even if a composite application is permitted under Section 44, 45 and 66, a....
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....vides as follows: "1. In pursuance of the said Agreement and in consideration of the sum of Rs. 15,00,000/ (Rupees Fifteen Lakhs Only) to be paid by the said Assignee to the Assignor in due course and also in consideration of the covenants and conditions hereunder contained to be observed and performed on the part of the said Assignee, the said Assignor does hereby and hereunder grant, sell, transfer, assign and assure unto the use of the said assignee all that the trade or business carried under the name and style of AAJ KA ANAND, SANDHYANAND and LIFE 365 with all beneficial interest and goodwill of the said assignor, in the said trade and business so carried on by him as aforesaid. In case any amount recovered by assignee on account of book debts of assignor. The assignee shall remit the said amount time-to-time to the assignor as and when received" 30. Clause 8 of the Deed clearly stipulates that the Assignee has obtained absolute usage rights in the intangible property and plant and machinery of the Assignor. Para 8 is as follows: "8. Assignment The Assignee has obtained absolute usage rights in the intangible property and Plant & Machiner....
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....ctor or partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor. ^1[(3) Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under sub- section (2), in respect of such default against which initiation of corporate insolvency resolution process is suspended as per section 10A.] Explanation.-For the purposes of this section a director or partner of the corporate debtor, as the case may be, shall be deemed to have exercised due diligence if such diligence was reasonably expected of a person carrying out the same functions as are carried out by such director or partner, as the case may be, in relation to the corporate debtor." 33. The sequence of the events and facts, as noted above, clearly indicate that although the Corporate Debtor was strictly restrained form dealing with the assets of the Corporate Debtor by notice under Section 13(2), the Directors of the Corporate Debtor resigned on 03.09.2020 and appointed their wives and son of one Director as new Director of the Corporate Debtor and the two Directors i.e. Respondent No. 5 and 6, Anand Shyam A....
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.... R/W 67 of Insolvency and Bankruptcy Code, 2016", it becomes pertinent to take note of fact that relief in terms of prayer (b) and (c) are not sought in terms of Section 66 of the Code in contradiction of prayer (d) where the relief has specifically been sought under section 66 leading to conclusion that the present application is a composite application seeking avoidance of transaction as well contribution u/s 66 of the Code." 34. We are in full agreement with the findings of the Adjudicating Authority that ingredients of Section 66(1) was fully proved and both the transactions were fraudulent transactions. 35. We further notice that under the orders passed by the High Court of Bombay dated 23.04.2024, passed in Writ Petition No.1044 of 2023 filed by the Liquidator, immovable assets which were leased out to the LLP has already been handed back to the Corporate Debtor. High Court in the said judgment dated 23.04.2024 issued following directions in Para 7: "7. Since the leave and licence agreement in any event expires on 30th June, 2024, the LLP shall vacate the premises occupied by them and hand over physical possession of the said premises to the If for any reason, ....
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.... of order in view of order dated 23rd April, 2024 passed by Hon'ble Bombay High Court. 44. As regards second components of prayer (d) i.e. (i) sum of Rs. 1,22,75,751/- paid by Corporate Debtor on behalf Respondent No. 4 in relation to (i) electricity, rent and water of Chakan Factory premises and Staff Salaries, even after execution of purported assignment agreement dated 3.8.2021, in terms of the assignment agreement, the Respondent No. 4 had acquired the right to usage of Plant & Machinery, accordingly, Respondent No. 4 is also liable to pay the amounts incurred in running of the said Plant & Machinery. Hence, the Respondent No. 1 to 6 are liable to contribute a sum of Rs. 1,22,75,751/- on account of electricity, rent and water of Chakan Factory premises and Staff Salaries paid by the Corporate Debtor. 45. As regards second components of prayer (d) i.e. (ii) sum of Rs. 1,37,34,660/-, being the amount of products sold by Respondent No. 4 pursuant to fraudulent transfer of the entire business of Corporate Debtor in terms of assignment agreement dated 3.8.2021, it has been observed by us at Para 24 above, a sum of Rs. 1,37,34,660/- is due and payable by Respond....