TaxTMI 
TaxTMI 
2026 (4) TMI 1164
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...., I.A. No.595/2025 has been partly allowed. Aggrieved by the order dated 04.03.2025, by which order, adjudicating authority has not accepted the prayer of the Canara Bank to exercise jurisdiction under Section 65 of the Insolvency & Bankruptcy Code, 2016 (for short the 'Code' or the 'IBC'), the Comp. App. (AT) (Ins.) No. 556/2025 has been filed. Comp. App. (AT) (Ins.) No. 588/2025 has been filed by Authum Investment Limited against the directions issued in paragraph 8.12 directing the Resolution Professional (RP) to conduct a Forensic Audit in relation to such transaction through the applicants empanelled auditor at the cost of the applicant (Canara Bank), Comp. App. (AT) (Ins.) No. 588/2025 has been filed against the above part of the order. 2. Both the appeals have been heard together and are being decided by this common judgment. 3. Brief facts of the case necessary to be noticed for deciding the appeals are: i. The corporate debtor - Carnival Techno Park Pvt. Ltd. vide its letter dated 20.01.2017 requested Reliance Capital Ltd. for financial assistance. ii. Financial creditor, Reliance Capital Ltd. vide its sanction letter dated 16.01.2017 sanctioned dis....
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....anding amount on the corporate debtor of Rs. 116,99,83,474/-. Details of security were also mentioned in 'Form-C'. Interim Resolution Professional (IRP) constituted the CoC assigning vote share of 71.76% to the financial creditor RCFL and 28.24% vote shares to the Canara Bank. x. The suspended director of the corporate debtor filed an appeal before this Tribunal challenging the admission order being Comp. App. (AT) (Ins.) No. 495/2024. On 27.03.2024, Canara Bank filed I.A. No.1698/2024 before the adjudicating authority seeking direction against the RP to provide particulars of claim of Authum Investment & Infrastructure Ltd. (who subsequently took over the RCFL). xi. The Canara Bank also filed an intervention application in Comp. App. (AT) (Ins.) No. 495/2024 before this Tribunal. On 05.06.2024, adjudicating authority dismissed I.A. 1698/2024 by which Canara Bank had sought documents from RP in respect of lending between the Reliance Capital Ltd. and corporate debtor. Canara Bank aggrieved by the order dated 05.06.2024 filed Comp. App. (AT) (Ins.) No. 1818/2024 which appeal was withdrawn by the Canara Bank on 06.09.2024. xii. Comp. App. (AT) (Ins.) No. 49....
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....d. Admission of claim RCFL to the tune of Rs. 293.4 crore is against the sanction loan of Rs. 75 crore. On the strength of 71.76 voting rights, Authum Investment & Infrastructure Ltd. has approved its own resolution plan and is now Successful Resolution Applicant (SRA). Taking all facts together it is clear that CIRP had been initiated fraudulently and in collusion. Canara Bank is the secured creditor of the corporate debtor. Aggrieved by the quantum of RCFL's claim admission, the Canara Bank has asked the IRP to disclose the particulars of RCFL's loan, on refusal of the IRP to disclose the I.A. was filed, which was rejected against which the Canara Bank filed its appeal. The appeal was also filed by suspended director of the corporate debtor against admission order which was withdrawn without any reason. NCLT having directed for conducting the Transaction Audit Report it is clear that serious doubt was raised with regard to transaction in question, in which circumstances adjudicating authority ought to have exercised its jurisdiction under Section 65 of the Code. Adjudicating authority committed error in treating the application filed by appellant under Section 65 of the Code as a....
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....cating authority on the application filed by Canara Bank, which appeal was withdrawn by the Canara Bank itself. All grounds which were raised in the appeal filed by the Canara Bank are the grounds which are repeated in Section 65 application. Canara Bank having filed 'Form-C' as a financial creditor which claim was admitted Canara Bank has submitted itself to the jurisdiction of the CIRP process and having participated in all CoC Meetings, it is not open for the Canara Bank now to contend that there was no debt. There was disbursement within meaning of Section 5(8) of the IBC by the financial creditor to the corporate debtor. Authum Investment & Infrastructure Limited's predecessor i.e., RCFL has never approved the alleged assignment, the Scheme of Demerger had already taken effect post vesting RCFL entitlement to recover the debt from corporate debtor which stood assigned to RCFL. Application filed under Section 65 by the Canara Bank was nothing but an application to recall the order of admission. Allegation of collusion has no basis. The admission order by NCLT itself notices the application was fully contested by the corporate debtor. Mere fact that appeal against the admission ....
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....pon the Respondents i.e. the Financial Creditor, Corporate Debtor and Resolution Professional; vi. That this Tribunal be pleased to pass orders directing The Insolvency and Bankruptcy Board of India ("IBBI") to conduct inquiry regarding ex-facie collusion between the Resolution Professional, RCFL, Corporate Debtor and the Respondent No.4 Prospective Resolution Applicant ("PRA"); vii. This Tribunal be pleased to pass orders directing a detailed inquiry through appropriate Investigation Agency of Government of India, Serious Fraud Investigation Office ('SIFO") into the affairs of the Financial Creditor, Corporate Debtor, Resolution Professional and Prospective Resolution Applicant, viii. pending the hearing and final disposal of the present Application the Respondent No. I be restrained from opening and placing the Resolution Plan (if any) before the CoC; ix pending the hearing and final disposal of the present Application the Respondent No. I be restrained from taking further steps in respect of CIRP of the Corporate Debtor; x. Pending the hearing and final disposal of the present Application the CIRP of the Corporate Debtor be kept i....
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.... Finance Company. Hence, it would have produced bank statements. iii. Moreover, the amount of Rs. 23,00,00,000/- was not disbursed by the Applicant in reality, but the amount was shown to have been transferred only through a journal entry. iv. The Respondent has contested the invoices raised by Reliance Money Solutions Private Limited and Reliance Securities Limited, wherein the amounts of these invoices correspond exactly with the purported and alleged disbursals by Reliance Capital Limited to Advantage Oversees Pvt. Ltd. According to the Respondent, these appear to be accounting adjustments. The same contentions have been made by the respondent as regards the amount of Rs. 50,32,00,000/- claimed by the Applicant. Further, no actual amounts were transferred either to Cinema Ventures Pvt. Ltd. or the Respondent. 27. Vide the Additional Affidavit the Corporate Debtor submitted that the 'debt' forming subject matter of the present Application was assigned by the Corporate Debtor to Asian Business Connections Pvt. Ltd. based on a right of assignment given to the Corporate Debtor under an alleged Addendum dated 16.01.2017. It is stated that no amount ....
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....Financial Creditor audited Financial Statement drawn after the effective date and so is the case with the Applicant as well. Accordingly, we find that the loan agreements entered into in the name of Reliance Finance Ltd is to transfer to the Applicant upon the scheme of demerger becoming affected. Hence the objection as to the absence of privity of contract between the parties has no merit. 32. The application made by the Financial Creditor is complete in all respects as required by law. It clearly shows that the Corporate Debtor is in default of a debt due and payable and the default is in excess of minimum amount stipulated undersection 4(1) of the IBC. Therefore, the debt and default stand established and there is no reason to deny the admission of the Petition. In view of this, this Adjudicating Authority admits this Petition and orders initiation of CIRP against the Corporate Debtor." 13. When we look into the application which has been filed by Canara Bank under Section 65, it is clear that applicant, Canara Bank is seeking re- adjudication of the issue of debt and default by means of Section 65 application. The plea which are sought to be raised by the Canara Ban....
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....e delivering its Order in the said proceedings merely because such document or plea is not dealt with in the Order. It is pertinent to refer the Clause 3,of the Addendum to Sanction Letter dated 16.1.2017 along with the Audited Financial Statement of the Corporate Debtor for the year ended on 31.3.2021. The Clause 3 of the Addendum states that: "That the Party of the First Part shall have the right to assign the subsisting loan with accrued interest as per the Said Letter to any of its group entity i.e. Asian Business Connections Private Limited or its subsidiaries and/ or its associates/ affiliates at the sole discretion of AB CPL (hereinafter referred to ''Assignee" in case if the below event triggers which is more particularly set out herein: i. in case, the First Party decides to sell the assets of the Company; or ii. in case, the Second Party decides to sell the shares of the Company." 8.10. The assignment of debt pursuant to power vested in Corporate Debtor is stated to have taken place on 30.9.2020. Clause 3 vests such power in two scenarios i.e. (i) in case, Corporate Debtor decides to sell its shares, or (ii) ABCPL decides to sel....
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....the Order dated 13.2.2024 was obtained by fraud or misrepresentation. Hence, this Tribunal cannot exercise its power to recall the said Order dated 13.2.2024. It is trite law that this Tribunal does not have power to review its own Order. Accordingly, it cannot proceed to decide the issue again at this stage whether there was disbursal of loan so as to constitute a financial debt after having dealt with this aspect vide Para 30 of the Order." 15. Adjudicating authority thus has also found that there is no pleading which may reveal that corporate debtor placed on record any submission demonstrating arising out of conditions contemplated in Clause 3 of addendum for exercising the right of assignment. 16. We are of the view that Bank of Baroda cannot be allowed to raise the issue that there was no debt and default on the date when Section 7 application was filed or admitted, the said question having already been decided while admitting Section 7 application after taking into consideration the plea of the corporate debtor which plea also was based on the assignment of debt in favour of ABC Pvt. Ltd. After noticing the said assignment, the adjudicating authority found the debt and....
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....filed by the Nandakini." 19. In the present case, Facility Agreement between the financial creditor and corporate debtor is on the record. The balance sheets of the corporate debtor immediately after disbursal of the loan reflect the loan in the books of the corporate debtor, thus the facts which were noticed in paragraph 62 of the judgment of 'Hindalco Industries Ltd.' (supra) are clearly distinguishable. In paragraph 97, following was laid down: "97. Section 65 of the IBC prescribes a stringent punishment, which may be a penalty extending up to Rs. one crore for fraudulent and malicious initiation of the CIRP. In such a background, we are of the clear view that the initiation of CIRP was done fraudulently by the corporate debtor working in collusion with financial creditor Nandakini and therefore such fraudulent initiation of CIRP started with the admission order under section 7 is liable to be set aside. Therefore, taking recourse to section 65 of the IBC, we set aside the admission order of the section 7 application as its basis, the section 7 application, and loan therein which is claimed to be due and in default are found to be fraudulent." 20. There cannot be ....
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....elevant material for purposes other than insolvency resolution. There is no statutory embargo on the Adjudicating Authority to exercise its discretion carefully and judiciously in a Section 65 application to prevent and protect the Corporate Debtor from being dragged into CIRP. This is a well settled proposition of law and the Adjudicating Authority has drawn reference to the binding precedents laid down by this Tribunal which have already been noticed at paragraph 30 above. We are therefore not much impressed by the argument of the Appellants that the Section 7 order of 17.05.2022 having attained finality, it cannot be relooked into by the Adjudicating Authority even when a Section 65 application is filed. 32. While returning our findings on the tenability of the impugned order, we must at the very outset add that that to prove any transaction to be collusive and fraudulent in nature, the degree of proof and evidence required should be beyond reasonable doubt and we propose to apply the same standard of proof to the facts of the present case. 33. When we see the material on record, we have no doubt that there was disbursal of money by the Financial Creditors to the Corporate....
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....cumulatively points to a web of conspiracy and collusion on their part to create a contrived situation of debt and default. The mistakes and infirmities committed by the Appellants in the process are not one- off or stand-alone mistakes or inadvertent errors. These errors are also grave in that it also included violation of other statutes like Companies Act. When we take a comprehensive and holistic view of the entire conspectus of facts and circumstances, we find that there is ample proof to show that the Section 7 application was a motivated attempt to bring the Corporate Debtor into the rigours CIRP proceedings. The bonafide of the Appellants in the filing of the Section 7 application is clearly doubtful. Viewed from the angle of the totality of circumstances, the findings of the Adjudicating Authority that the insolvency proceedings in C.P.(IB)-50(PB)/2021 resulting in the order dated 17.05.2022 were initiated fraudulently and with malicious intent for a purpose other than the resolution of the insolvency of the Corporate Debtor, is neither dehors the records nor unwarranted. When such fraudulent CIRP proceedings are initiated, the Adjudicating Authority has jurisdiction under ....