TaxTMI 
TaxTMI 
2025 (12) TMI 1618
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....n Professional. Aggrieved by the impugned order, this Appeal has been filed. 2. Brief facts of the case necessary to be noticed for deciding the Appeal are:- 2.1. The Corporate Debtor- Pancard Clubs Limited was engaged in the business of owning developing and operating hotel clubs and resorts across India. The Corporate Debtor floated Collective Investment Scheme assuring earnings returns made by the investors. The Corporate Debtor received investment in furtherance of the scheme from over Rs. 50 lakhs investors who invested in the scheme to the tune of approximately Rs. 70350000000 cumulatively. The Security and Exchange Board of India (SEBI) issued show cause notices and directions against the Corporate Debtor under different provisions of the SEBI Act, 2002. On 02.12.2016, an order was passed against the Corporate Debtor and its director for recovery of approximately Rs. 70350000000. SEBI order for attachment of bank account/demat account of the Corporate Debtor. Shareholding of the Corporate Debtor was also attached on 21.12.2016. Moveable properties of the Corporate Debtor were attached. An order dated 21.12.2016 was issued by the SEBI in Recovery Certificate No.1020 of ....
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....s was informed about the valuation, however valuers were not allowed to enter into the property. E-mail dated 25.01.2023 was sent to the Suspended Director of the Corporate Debtor seeking information on operational properties of Pancard Clubs Limited. Several e- mails were sent by the Resolution Professional to the Suspended Director as well as to the Appellant asking for status and other details but no information was provided either by the Appellant or Suspended Director regarding property in question. Meetings were scheduled between the Resolution Professional and the resort which could not be fructified. A legal notice dated 05.04.2023 was issued to the Appellant by which legal notice information regarding management of the affairs of the Corporate Debtor was asked for. Relevant information was sent and documents as requested by letter dated 13.12.2022 were called for. E-mail dated 06.06.2023 was also sent by the Resolution Professional asking the Appellant to share the copy of Memorandum of Association executed between Pancard Clubs Limited and Gir Vanvaso Resort for operating the property as well as proposal for leasing of Gir Vanvaso property from 09.09.2022 along with the r....
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....Memorandum of Understanding dated 06.12.2013 (an unregistered document) claiming that Mr. Manish Kalidas Gandhi, Director of Corporate Debtor entered into MoU with Mr. Kiritbhai Keshurbhai Sorathia- Party No.1 and Shri Deepakbhai Naranbhai Suva- Party No.2 with Mr. Manish Kalidas Gandhi-Party No.3 under which amount of Rs. 80,000 in cash was given by Mr. Kiritbhai Keshurbhai Sorathia and Shri Deepakbhai Naranbhai Suva on different dates between 01.12.2013 to 04.12.2013 in cash. Under the representation of Mr. Manish Kalidas Gandhi that under the scheme of the Corporate Debtor, double of the investment amount shall be returned for which 6 years 3 months was fixed and in event Rs. 1,60,00,000/- is not returned within the time then the ownership right and possession of Vanvaso resort shall be entrusted to Party No.1 and Party No.2 and on the date of expiry of the investment period and until ownership is transferred entire administration of Vanvaso Resort shall be handed over by Party No.3 to Party No.1 and 2 and Party No.1 and 2 will play the role of administrator and Party Nos.1 and 2 will reimburse the amount invested by them from and out of any return/ income generated by Resort an....
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....e of the said property. In paragraphs 18 and 19 of the impugned order, following was directed:- "18. In view of the above, we are of considered view that the Respondent ought to have handed over peaceful and vacant possession of said property to the Resolution Professional, as it formed part of assets of the Corporate Debtor. Accordingly, the Respondent, including Mr. Kirit Sorathia and Mr. Deepakbhai Naranbhai Suva, stated to be partner of Mr. Kirit Sorathia are directed to handover the possession of the said property. 19. The prayer (a) doesn't survive in view of MOU having been placed on record. As regards payment of usage charges prayed in prayer b and c, we note that MOU, even if such MOU is assumed as enforceable, does not specify any periodical payment having been agreed with the Respondent. However, it is undisputed fact that the Respondent was in possession and enjoyment of the property as per its own admission, accordingly, we consider it appropriate to hold that the fair value of the rent for the usage of said property ought to be paid by the Respondent. Accordingly, the Applicant is directed to determine the fair value of such rent and inform the R....
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....Professional or SRA cannot enforce any right against the Appellant who had been continuing in possession in part performance of written contract. 5. Counsel appearing for the Respondent refuting the submissions of the Counsel for the Appellant submits that admittedly, the Resort is in ownership of the Corporate Debtor, in the order attaching the assets of the Corporate Debtor by SEBI, Vanvaso Resort is also listed one of the immoveable assets. The Appellant in spite of Resolution Professional writing several e-mails and letters never disclosed the MoU and it was only in reply to application filed by Resolution Professional, MoU for the first time saw light of the day. It is submitted that the MoU is a sham and fictitious document which was created by the Appellants to somehow continue in possession of the assets unlawfully. There being prohibitory attachment order of the SEBI dated 21.12.2016, neither possession of the assets can be handed over to the Appellant by Corporate Debtor nor any right can be claimed by the Appellant. The SEBI having already attached all the assets of the Corporate Debtor due to non-payment of Rs. 7,035 Cr. amount. MoU relied by the Appellant is neither....
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....tion No.(I) 8. The submission of the Appellant is that the Adjudicating Authority could not have proceeded to decide the application filed by the Resolution Professional IA No.3973 of 2023 after approval of the Resolution Plan on 25.04.2024. The submission is that the CIRP came to an end after approval of the Resolution Plan on 25.04.2024 reliefs in IA remains unaltered. Jurisdiction of Resolution Professional is circumscribed by the duration of the CIRP. On approval of the Resolution Plan, Resolution Professional became functus officio and all powers under Sections 18, 19, 23 and 25 stands exhausted, hence, the IA which was filed on 25.08.2023 and was amended to substitute the Resolution Professional with the SRA. The application under Section 60(5) could not have been entertained by the Adjudicating Authority through the SRA. 9. The above submission is refuted by the Counsel for the Respondent who submits that after approval of the Resolution Plan, the SRA was substituted in place of the Resolution Professional, hence, was fully entitled to prosecute the application. Approval of the Resolution Plan had no effect on prosecution of the application. Assets admittedly belongs t....
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....e of the Resolution Professional application was required to be proceeded with and there can be no infirmity with prosecution of the application and decision of the Adjudicating Authority. We, thus, do not find any substance in the above submission of the Appellant objecting to the decision of the Adjudicating Authority on the application which was prosecuted by the SRA/ Corporate Debtor. Question No.(II), (III) & (IV) 13. Question No.(II), (III) & (IV) being inter connected are being taken together. From the facts of the case, as noted above, it is clear that much before initiation of the CIRP against the Corporate Debtor by order dated 09.09.2022, the SEBI has attached the assets of the Corporate Debtor under Section 28A of the SEBI Act, 2002 on 21.12.2016. Along with the application which was filed by the Resolution Professional being IA No.3973 of 2023, notice of attachment of shareholdings and order under Section 28A were filed along with the application. Copy of the order dated 21.12.2016 was filed as Annexure A-3 to the application of the Resolution Professional. It is useful to notice the entire order dated 21.12.2016 which is to the following effect:- "Order No. R....
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....r movable properties held by the defaulters. 4. It is further directed that all persons are hereby prohibited from taking any benefit under such disposal, transfer, alienation or charge in respect of the properties mentioned above which stands attached in execution of Recovery Certificate. 5. The defaulters are also hereby directed to furnish at SEBI, Head Office, Mumbai: a) complete details of all the movable and immovable properties held by the defaulters and charges, if any, thereon in the format prescribed at Annexure C, duly certified by the Board of Directors, within two weeks from the date of this order. b) Original title deeds, valuation reports of all the properties held by the defaulters, either singly or jointly, within two weeks from the date of this order. c) details of any financial and fixed assets held by the defaulters singly or jointly d) details of capacities held by him/her in any company, any firm or any business concem, etc. along with the details of shareholding, etc. and e) details of debtors, persons from whom money is due to the defaulters either singly or jointly. 6. This order shall ....
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....ed 9th September, 2022 ("the Order") in CP (IB) 4578/MB/C-1/2018 initiated the Corporate Insolvency Resolution Process (CIRP) of the Company as per the provisions of the Code. 2. Vide the said Order dated 9th September 2022, the undersigned was appointed as the Interim Resolution Professional ("IRP") of the Corporate Debtor. Subsequently, the undersigned has been appointed as the Resolution Professional ("RP") of the Corporate Debtor by the Committee of Creditors of the Corporate Debtor, in terms of the provisions of the Code. 3. By virtue of the provisions of Code read with the Order, I would like to inform you that with effect from the date of the Order i.e., 9th September, 2022 ("Insolvency Commencement Date"), in terms of Section 17 of the Code, the management of the affairs of the Corporate Debtor vests in me as the IRP/RP of the Company and as per Section 17(b) of the Code, the powers of the board of directors of the Corporate Debtor stands suspended and would be exercised by the undersigned in the capacity of the IRP/RP. Further, in terms of Sections 18 & 23(2) of the Code, the IRP/RP is under a statutory obligation to take control and custody of any asset ....
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....iven by any of the erstwhile directors/employees/ authorized signatories of the Company whether given prior to the date of the Order or at any time thereafter. You are hereby requested to ensure prevention of any acts of vandalism and damage to the Property. 8. In case you fail to promptly respond to the above mentioned queries and provide the required information/documents within 7 days of receipt of this letter, the Resolution Professional will be constrained to take action and initiate appropriate legal proceedings against you and the concerned persons. Thanks & Regards, Rajesh Sureshchandra Sheth Insolvency Professional Regn. No.: IBBI/IPA-002/IP- NO1021/2020-2021/13298 AFA Number- AA2/13298/02/201222/201819 (valid till December 20,2022) Resolution Professional in the matter of Pancard Clubs Limited" 16. The e-mail dated 13.12.2022 was replied on behalf of the Resort where the authority of the Resolution Professional and reason for calling the details were called for. Resolution Professional sent various e-mails and communication asking time and again the details with respect to operations of the Resort. Agreement or cont....
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....t of payment of Rs. 80 lakhs in total in cash was filed. The Resolution Professional after noticing the reply and the case set up on the basis of MoU filed his rejoinder where it was pleaded that Appellants are in illegal possession of the assets of the Corporate Debtor. No payment was received by the Corporate Debtor. The Board Resolution dated 24.08.2013 which is claimed by the Appellant does not authorise Mr. Manish Kalidas Gandhi to enter into MoU. It was pleaded that MoU is unregistered document and does not give any right. The Resolution Professional has pleaded that the document is fictitious document. On multiple follow ups by the Resolution Professional, the document was never disclosed to the Resolution Professional nor the MoU was shared with the Resolution Professional. Documents was claimed to be false and fictitious and it was pleaded that the transaction is malafide and misfeasance. 18. The submission which has been raised by the Appellant is that the Adjudicating Authority has no jurisdiction to enter into MoU claimed on behalf of the Appellant and Adjudicating Authority had no jurisdiction to enter into contractual dispute between the parties. Counsel for the Ap....
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....above case, the Hon'ble Supreme Court held that the Adjudicating Authority has no jurisdiction to enter into contractual issues between the parties. In the above case, the Hon'ble Supreme Court has referred to both the judgments of "Gujarat Urja Vikas Nigam Limited" (supra) and "Embassy Property Developments Pvt. Ltd." (supra). In paragraphs 26, 27, 28 and 29, following was held by the Hon'ble Supreme Court in Tata Consultancy Services Ltd. (supra):- "26. In Gujarat Urja (supra), the contract in question was terminated by a third party based on an ipso facto clause, i.e., the fact of insolvency itself constituted an event of default. It was in that context, this Court held that the contractual dispute between the parties arose in relation to the insolvency of the corporate debtor and it was amenable to the jurisdiction of the NCLT under Section 60(5)(c). This Court observed that "....NCLT has jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the corporate debtor... The nexus with the insolvency of the corporate debtor must exist" (para 69). Thus, the residuary jurisdiction of the NCLT cannot be invoked if the termination of a....
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....e debtor. Even more crucially, it cannot even be invoked in the event of a legitimate termination of a contract based on an ipso facto clause like Article 9.2.1(e) herein, if such termination will not have the effect of making certain the death of the corporate debtor. As such, in all future cases, NCLT would have to be wary of setting aside valid contractual terminations which would merely dilute the value of the corporate debtor, and not push it to its corporate death by virtue of it being the corporate debtor's sole contract (as was the case in this matter's unique factual matrix). 177. The terms of our intervention in the present case are limited. Judicial intervention should not create a fertile ground for the revival of the regime under Section 22 of SICA which provided for suspension of wide- ranging contracts. Section 22 of the SICA cannot be brought in through the back door. The basis of our intervention in this case arises from the fact that if we allow the termination of PPA which is the sole contract of the corporate debtor, governing the supply of electricity which it generates, it will pull the rug out from under CIRP, making the corporate death of th....
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....f law or fact arising out of or in relation to insolvency or liquidation under the Code. There cannot be any dispute in the present case that application which was filed by the Resolution Professional to take possession of the assets of the Corporate Debtor arose out of insolvency process against the corporate debtor, hence, the decision of the application was well within the jurisdiction. 22. Now we come to the MoU dated 06.12.2013. The Adjudicating Authority in the impugned order has expressed its doubt about the contemporaneous existence of the MoU. As noted above, the Appellant never shared the MoU with the Resolution Professional in spite of repeated e-mails and letters and legal notice. MoU rely on cash payment and cash payment to the extent of Rs. 80,00,000/- receipt of which was filed along with the reply to the IA. The assets were attached by the SEBI on 21.12.2016. MoU is unregistered document. It is further pleaded by the Resolution Professional that no payment claimed to be made by the Appellant were received by the Corporate Debtor. The sequence of the facts and events clearly supports the doubt expressed by the Adjudicating Authority about existence of the MoU. MoU....
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....e case of tangible immoveable property of a value less than one hundred rupees, such transfer may be made either by a registered instrument or by delivery of the property. Delivery of tangible immoveable property takes place when the seller places the buyer, or such person as he directs, in possession of the property. Contract for sale.-- A contract for the sale of immoveable property is a contract that a sale of such property shall take place on terms settled between the parties. It does not, of itself, create any interest in or charge on such property." 24. Section 17 of the Registration Act, 1908 contains a provision which require compulsory registration of documents. Section 17(1)(A) which has been inserted w.e.f. 24.09.2001 is as follows:- "17. Documents of which registration is compulsory.- [(1A) The documents containing contracts to transfer for consideration, any immovable property for the purpose of section 53A of the Transfer of Property Act, 1882 (4 of 1882) shall be registered if they have been executed on or after the commencement of the Registration and Other Related laws (Amendment) Act, 2001 (48 of 2001) and if such documents a....
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.... is an exception to the provisions which require a contract to be in writing and registered and which bar proof of such contract by any other evidence. Consequently, the exception must be strictly construed." 28. Now we come to the MoU which is relied by the Appellant. MoU relied by the Appellant claims that an amount of Rs. 80,000 was being handed over to Mr. Manish Kalidas Gandhi, Director of the Corporate Debtor with respect to scheme running in Corporate Debtor that if you invest in company you will get benefit from the scheme. The condition of the MoU are as follows:- "1. The said amount of Rs. 80,00,000/- (Rs. Eighty lacs only ) given by us shall be utilized and employed by the Party no.3 for the development of Vanvaso Resort. 2. The amount paid by us Party No. 1 and Party No. 2 as per the scheme of Pancard Club Limited and as stated by Party No. 3 will be returned to us by doubling the amount paid by us in 6 years and 3 months i.e. to say the Party No. 1 and Party No. 2 will be given total amount of Rs .1,60,00,000/- (One Crore Sixty Lacs only) towards return. 3. As per condition mentioned at Serial no 2, if party no. 3 commits default in ....
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....vour. G. From the time we are handed over the entire possession of the Vanvaso Resort, we will be entirely responsible for V anvaso Resort and after the completion of our return/compensation amount, the possession of the Vanvaso Resort given to us shall be returned/entrusted to the party no. 3 in the same condition in which it was given. Further, if any government permission and or approval is required to be obtained to run Vanvaso Resort or for administering the affairs, you will execute an agreement for the same and all other cooperation related to Vanvaso Resort will also be extended by you. H. We, ie, Party No. 1 and Party No. 2 shall not store any article prohibited by law or do any kind of work against the law in this Vanvaso Resort. I. This Agreement of Understanding appearing as herein above has been executed today with the Stamp Certificate of Rs. 300/- by we parties hereto in our respective willingness and in our conscious state of mind, by our bonafide without any kind of force- coercion, and m our proper senses, reading and understanding to the same which is confirming, admitting and binding to both the parties and in assurance thereof, ....
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....ereafter, they are in occupation thereof. The evidence on record, however, does not in very clear terms establish that the appellant/plaintiff had conscious notice or knowledge of this agreement for sale at the time of her purchase. Admittedly as well, neither the predecessor-in-interest of the respondents nor they had taken recourse to law for specific performance of the agreement. This assumes importance in view of the averment made in the written statement that even prior to the demise of the predecessor-in-interest of the vendors of the appellant/plaintiff, he did not comply with the requests of the original defendant to get the sale deed executed and his legal heirs, after his demise, also adopted the same non-cooperative stance. 18. As would be patent from the above quotes, the protection of a prospective purchaser/transferee of his possession of the property involved, is available subject to the following prerequisites: (a) There is a contract in writing by the transferor for transfer for consideration of any immovable property signed by him or on his behalf, from which the terms necessary to constitute the transfer can be ascertained with reasonable certai....
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....eaving the defendant-appellant with no subsisting right to remain in possession of the suit premises." 33. In the above case, there was Agreement to Sale dated 10.04.2022 and receipt of payment of sale consideration. In the above context, the Hon'ble Supreme Court made following observations:- "ingredients of Section 53A was found to be fulfilled in the above case." 34. The present is a case where the MoU dated 16.12.2013 cannot be said to be contract of sale nor the said MoU was registered which is requirement under Section 17 as amended in the State of Gujarat for Agreement to Sale, hence, on strength of the MoU dated 06.12.2013, no right can be claimed under Section 53A by the Appellant. As observed above, we full endorse the view of the Adjudicating Authority that contemporaneous existence of the document itself is in doubt. Looking to the entire facts and circumstances of the present case, Appellant's case is that he got the possession of the resort in the year 2020. We have already noticed the order of SEBI dated 21.12.2016 which clearly prohibited any one to claim any right on the basis of not to act upon any documents purporting to be dealing with transfer, m....
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....nt of usage charges which can be only determined by a Civil Court. Appellant submits that mesne profits can be awarded only where possession is found to be wrongful or unauthorised. Mesne profits are compensatory in nature and arise solely as a consequence of illegal or unlawful occupation of property by a person not entitled to its possession. 38. We having found that the MoU dated 06.12.2013 is not legally valid document to claim any right of possession of the said assets of the Corporate Debtor. Appellant has to be treated to be in unauthorised and wrongful possession of the assets. At this juncture, we need to notice one more aspect of the matter. MoU dated 06.12.2013 was entered with Mr. Kiritbhai Keshurbhai Sorathia- Party No.1, Shri Deepakbhai Naranbhai Suva- Party No.2 and Mr. Manish Kalidas Gandhi-Party No.3. Mr. Manish Kalidas Gandhi was Director of the Club and for execution of the MoU dated 06.12.2013, Appellants have relied on Board Resolution dated 24.08.2013. Copy of the Board Resolution dated 24.08.2013 was filed along with the reply of Appellant. Photocopy of the Board Resolution is as follows:- "PANCARD CLUBS LIMITED Xxxx Copy of the resolution pass....