TaxTMI 
TaxTMI 
TaxTMI 
2026 (3) TMI 158
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....C.P. (IB) No. 83 of 2020. By the impugned order, the Adjudicating Authority has allowed I.A. No. 278 of 2023 filed by the Liquidator of the Corporate Debtor-M/s Doshion Water Umbrella Pvt. Ltd. holding certain transactions conducted by the Appellants No.1 and 2 as transactions falling within the ambit of Section 66 of IBC and directing refund of the amount withdrawn to the account of the Corporate Debtor. Aggrieved by the impugned order, the present appeal has been jointly preferred by the Appellants. 2. Coming to the factual matrix of the case, on the initiation of CIRP of the Corporate Debtor- Doshion Water Umbrella Pvt. Ltd. on 01.07.2022, the Resolution Professional ('RP' in short) appointed M/s Pipara & Company as the Transaction Auditor which submitted the Transaction Audit Report ('TAR' in short) on 01.12.2022. The RP sought clarifications from the suspended management on 26.12.2022 on the observations of fraudulent trading/wrongful transactions as reported by the Transaction Auditor in the TAR with respect to two sets of transactions, one relating to managerial remuneration paid to Directors amounting Rs. 23.64 lakhs and the other of Rs. 2.78 lakhs. The suspended managem....
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....endered by the Appellants was clearly recorded in the books of accounts of the Corporate Debtor. Further, there were no other employees working in the company who were to receive remuneration and there were no other admitted remuneration dues in respect of similarly placed employees, workmen or like operational creditors. Hence payment of remuneration to the Appellants cannot be said to have been given to them in preference over payments which were required to be made to other similarly placed creditors. Thus, the payment of their dues could not be viewed to have been done with the intent of defrauding other creditors. Submission was also pressed that payment of managerial remuneration was made to keep the Corporate Debtor run as a going concern and hence it was very much within the scope of ordinary course of business. Reliance was also placed on the judgment of the Hon'ble Apex Court in Anuj Jain vs. Axis Bank Ltd. & Ors. (2020) 8 SCC 401 to claim that specific material fact is required to be pleaded in a Section 66 application. In the present case, the Respondent failed to prove that the transaction fell under Section 66 of IBC. It was further submitted that the Transaction Audi....
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....shed by the circumstantial grounds. The present was also a case where the payment was made in priority to the insiders at the expense of the other creditors including statutory dues. Being insiders, such self-payments warranted strict justification and compliance to accounting discipline in the context of statutory dues since insolvency was ongoing. These transactions were thus wrongful transactions not made in the ordinary course of business with intent to defraud writ large which has been rightly noted by the Adjudicating Authority by way of a well-reasoned order. 5. We have duly considered the arguments advanced by the Learned Counsel for the parties and perused the records carefully. 6. The short point for our consideration is whether the payment drawn by the suspended management towards their managerial remuneration for FY 2019-2020 can be construed as a wrongful trading/fraudulent transaction under Section 66 of IBC and, if so, whether the said amount requires to be returned to the Corporate Debtor by the suspended management-Appellants. However, both these issues being closely inter-dependent, we would deal with them conjointly. 7. It is the case of the Appellants t....
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....hat the intent of the Appellant was to defraud the other creditors thereby attracting Section 66 of IBC. 9. Coming to our analysis and findings, it is well settled that to establish a case under Section 66 of the IBC for fraudulent or wrongful trading, a high burden of proof is required. The degree of proof and evidence required should be of unimpeachable nature and beyond reasonable doubt. Mere suspicion or presumption of fraud would not suffice to attract the provisions of Section 66. Having outlined the above test, we now proceed to examine whether the Respondent had furnished adequate, cogent and robust material proof of malafide intent on the part of the Appellants to defraud the creditors which travelled beyond the realm and spectre of suspected wrongdoing. 10. When we look at the material on record, we find that the IBBI Claims Portal of the Corporate Debtor reflected the total claims received from the Appellants as admitted by the RP towards their remuneration claim of Rs. 54.36 lakhs which is placed at page 312 of the Appeal Paper Book ("APB" in short). This table does not show admission of any other employee-related claims. Even the TAR placed at page 131 of APB sho....
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....the CIRP admission orders was issued on 01.07.2022. When we look at the actual bank statements placed at pages 315-317 and 327-329 of the APB, it shows that the amounts were actually withdrawn on 31.03.2021 which withdrawals had therefore effectively occurred more than 15 months prior to the admission of Section 7 petition. Furthermore, when the technical services were rendered legitimately by the erstwhile management to keep the Corporate Debtor running as a going concern, the tenability of the same transaction cannot be doubted or viewed suspiciously. Moreover, these services were rendered two years before the commencement of CIRP. Hence the claim of the RP of these transactions being preferential and wrongful keeping in mind the proximity of the cheque withdrawal date to the insolvency commencement date is entirely misplaced and factually incorrect. The inference of purported last-minute siphoning away of funds at the expense of other creditors is wholly unsupported by facts on records. 12. Thus, when payments were made to the Appellants for legitimate services rendered by them in the ordinary course of business with full disclosure of accounts of the Corporate Debtor, the sa....
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....with fraudulent intent must be accompanied with specific pleading and proof. Insofar as the project related advisory services for which Rs. 2.78 lakh was recovered by the Appellants after the CIRP initiation date, the Appellant have themselves admitted that this amount was not admissible in view of moratorium and hence we need not dwell on this aspect any further. 14. Coming to another argument raised by the Respondent that since the Appellant did not deposit statutory dues such as TDS at the time when the account of the Corporate Debtor has been classified as NPA, hence the payments for managerial services were preferential in nature is found to be equally misconceived. The inability of the Corporate Debtor company to meet its tax obligations during a period of financial distress when placed in juxtaposition to the payment of remuneration for managerial services form two separate buckets or categories of payments. Hence not meeting tax obligations cannot form a ground to demonstrate any dishonest design on the part of the suspended management to defraud creditors or to carry on business with an intent to deceive. Any such conclusion would be premised on presumption and assumpti....