TaxTMI 
TaxTMI 
2026 (5) TMI 1680
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....ity (National Company Law Tribunal) Principal Bench, New Delhi admitting Section 7 application filed by Religare Enterprises Ltd., the Respondent No.1 herein against the Corporate Debtor- Ligare Aviation Ltd. Company Appeal (AT) (Insolvency) No.992 of 2023 has been filed by two Appellants. Appellant No.1 shareholder of the Corporate Debtor having 1% shareholding and Appellant No.2- RHC Finance Pvt. Ltd. having 70% shareholding in the Corporate Debtor. Company Appeal (AT) (Insolvency) No.1238 of 2023 has been filed by Daiichi Sankyo Company Ltd. claiming to be aggrieved by the impugned order. Appellant claim to have filed execution proceeding in Delhi High Court for execution of Arbitral Award in which garnishee order has been passed against the Corporate Debtor by Delhi High Court for garnishing a sum of Rs. 184.04 Crore which has been attached by the High Court of Delhi in the execution proceeding through order dated 26.02.2018. 2. Brief background facts of the case leading to filing Section 7 application need to be noted first. 2.1. The Financial Creditor- Religare Enterprises Ltd. and the Corporate Debtor- Ligare Aviation Ltd. are both group companies and related party. A ....
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....t also various undertakings were recorded. Orders passed by Delhi High Court were challenged in the Hon'ble Supreme Court where also various undertakings were recorded. Contempt proceedings was initiated against the Judgment Debtor which Contempt Petition (C) No.2120 of 2018 was decided on 15.11.2019 ("Vinay Prakash Singh vs. Sameer Gehlaut and Ors."- (2021) 16 SCC 319). In the said proceeding, the Hon'ble Supreme Court has noted the relation between various entities belonging to the group. In paragraph 3 of the judgment of the Hon'ble Supreme Court, chart reflecting various companies of two brothers Mr. Malvinder Mohan Singh and Mr. Shivinder Mohan Singh were noticed. Both the Financial Creditor and the Corporate Debtor were included in the chart. There were change of management in various companies of two brothers including the change of management in the Corporate Debtor as well as Financial Creditor in the year 2016 and thereafter. On 08.12.2017, NCLT permitted amalgamation of RAIML with Religare Enterprises Ltd. (Respondent No.1 herein). On 27.03.2019, the subsidiary of Respondent No.1 namely- Religare Finvest Ltd. filed an FIR No.50/2019 naming the Financial Creditor- Religar....
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....f the Corporate Debtor. Averments of various suppression by Financial Creditor has also been pleaded. Charge-sheet submitted by Economic Offence Wing, Delhi Police, has also been referred and pleaded. Commonality of the directorship between predecessor-in-interest of the Financial Creditor and predecessor-in-interest of the Corporate Debtor was also pleaded. Detail pleadings in reply to Section 7 application were made by Corporate Debtor opposing Section 7 application and pleading that entire transaction was fraudulent and not a financial debt. A rejoinder-affidavit was also filed by the Financial Creditor to the reply. 2.5. Both the parties were heard and Adjudicating Authority by order dated 18.07.2023 admitted Section 7 application. Adjudicating Authority noted the defence taken by Corporate Debtor that the transactions inter-alia on the ground the funds transferred were not for time value of money, but were transferred further to other sister-concerns of the Applicant which reflects from the Bank Statement of the Respondent. Adjudicating Authority however, rejected the said defence observing that the contention is not sustainable as this particular submission is patently con....
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....Corporate Debtor was held to be moonshine defence and rejected and Section 7 application was admitted. Aggrieved by the order, these appeals have been filed. 2.7. On 28.07.2023, Company Appeal (AT) (Insolvency) No.992 of 2023 came for consideration before this Tribunal on which date following order was passed:- "28.07.2023: Learned Counsel for the Appellant submits that by impugned order Adjudicating Authority has admitted Section 7 application filed by Religare Enterprises Ltd. (the Respondent herein). It is submitted that the amount which is claimed to be disbursed to the appellant was in fact as per the Bank statement filed before the Adjudicating Authority was transferred on the same day to another subsidiary and there was no disbursement for time value of money. The investigations are going on with regard to the respondent and other subsidiaries and charge sheets have also been submitted. It is submitted that the submissions which was addressed before the Adjudicating Authority that these are all part of fraudulent transactions have been repelled by Adjudicating Authority observing that this is the moon shine defense. Mr. Sunil Fernandes, Learned Counsel f....
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....der passed on Section 7 application admitting CIRP against the Corporate Debtor. 3. Mr. Arun Kathpalia in support of appeal submits that appellant has decree of more than 4,000 crores against the erstwhile group of Corporate Debtor where the Corporate Debtor is a garnishee to the extent of 200 crores. He has referred to ground 'm' & 'n' of the appeal which is as follows: "m. In response to the garnishee orders issued under Order XXI Rule 46A of the CPC against the Corporate Debtor, the Corporate Debtor filed objections in the form of an affidavit dated 11 May 2018 before the Hon'ble High Court of Delhi. In these objections, the Corporate Debtor acknowledged its liability to pay debts to Judgment Debtor No. 19 (RHC), amounting to approximately INR 184.04 crores as of 11 April 2018. However, the Corporate Debtor claimed that it does not have adequate funds to fulfil its payment obligations, citing accumulated losses of INR 1000 crores reflected in its financial statements as on 31 March 2017, as well as other secured creditors with claims amounting to INR 290 crores. In response to this, the Appellant filed a reply dated 16 August 2018, refuting the contentions made....
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....er appellant can be said to be person aggrieved to enable him to challenge the proceedings under Section 7 initiated against the Corporate Debtor. 9. The grounds 'm' and 'n', as extracted above, clearly indicate the grievances of the appellant with regard to proceedings which have been admitted under Section 7 against the Corporate Debtor. 10. The submission of the counsel for the respondent may be true that appellant may be a unsecured financial creditor of the Corporate Debtor but when the very proceedings are questioned on the ground that these proceedings are tainted proceedings, it cannot be said that appellant has no locus to file this appeal. We, thus, reject the objection of the respondent that appellant has no locus. We issue notice. 11. Let Reply be filed within two weeks. Rejoinder, if any, may be filed within two weeks thereafter." 2.10. However, in paragraph 12, it was held that observations of the Tribunal are only for considering the objections regarding the locus raised by the Respondent and are not to be treated to be any expression of the opinion by the court. 2.11. In both the appeals, reply and rejoinder-affidavit has been filed.....
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....ent of financial creditor and corporate debtor took place in the year 2016. The Religare Finvest Ltd. a subsidiary of the financial creditor had lodged an FIR with economic offences wing, FIR No.50/2019, whereas Religare Finvest Ltd. who was transferred the amount of Rs. 3.60 crore as noted above alleged that MoU signed were documents created dishonestly to give the colour of genuine transactions to sham transactions, the purpose of which was only to siphon away money. The subsidiary of the financial creditor having itself made allegations against the transactions undertaken by the earlier management in a fraudulent manner the said allegation clearly supports the case of the corporate debtor taken before the adjudicating authority in reply filed to Section 7 application. At the time of relevant transactions, corporate debtor and financial creditor were controlled by the same management and Mr. Anil Saxena who had signed the MoU for Rs. 3.6 crore is an accused in FIR No.50/2019. For determining whether the transaction involves the financial debt or not, real nature of transaction has to be found out as has been laid down by the Hon'ble Supreme Court in 'Phoenix ARC Private Limited' ....
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....y financial creditor did not arise of any financial transaction, hence the appellant has every right to question initiation of such proceedings which arises out of transaction for routing the money through the corporate debtor. The amount transferred to the corporate debtor was not for any time value of money but was only a circuitous routing of money group company under the same management controlled at the time of disbursement. NCLT allowed the admission of Section 7 application observing that none of the 6 MoUs at any of the clauses provide that the payment received by the respondent was for onwards transmission to a third party. The above observation of the NCLT is wholly erroneous. Sufficient materials were brought on record before the adjudicating authority including the bank record proving that the amount of Rs. 3.6 crore received by the corporate debtor on 31.03.2017 was on the same day transferred to Religare Finvest Ltd., the subsidiary of the financial creditor. There are various other transactions reflected from material on record which indicate that all transactions were for siphoning money form one group company to other group company. The MoU was sham one-pager docum....
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....nt to the MoU 30.03.2009. The fact that corporate debtor has dealt the amount by transferring to another entity does not have effect in disbursement of a financial debt. MoU 30.03.2009 clearly prove the nature of transaction as financial transaction. The commonality of the management during earlier period does not by itself convert an interest-bearing loan into a sham transaction. The fact that the financial creditor and corporate debtor were under the same management there was no ineligibility by filing Section 7 application. Related-party status between the financial creditor and corporate debtor does not bar Section 7 application, where financial debt and default are otherwise established which may have consequences for participation of the CoC in an appropriate case. The transfer of Rs. 3.6 crore amount received by corporate debtor from financial creditor on the same day does not demonstrate any financial wrong doing. FIR and Criminal Proceedings relied by the appellant are neither relevant nor concerned with the debt in question. FIR No.50/2019 was not filed by the financial creditor rather Religare Finvest Ltd. was subsidiary of the financial creditor and it relate to alleged....
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....tion. The appellant has failed to make out any case for fraudulent initiation of the CIRP by the financial creditor. Historical allegations concerning the Singh brothers, RFL, group control or Daiichi's execution proceedings do not meet that threshold under Section 65 of the IBC. Section 65 required specific pleading of fraud. Section 65 cannot be invoked in the facts of the present case. The reliance on the judgment of 'Phoenix ARC Private Limited' (supra), is clearly distinguishable. The said judgment was on its own facts, where the transaction was itself found to be sham and arose in the context of related-party participation in the CoC. Appeal discloses no ground for interference. Appellant lacks locus to resist CIRP proceedings. Appeal filed by the Daiichi Sankyo Company needs to be dismissed. 8. Learned counsel for the IRP submits that subsequent to the commencement of the CIRP, IRP has made public announcement in Form-A on 20.07.2023 calling upon the creditors of the corporate debtor to submit their claims. IRP visited the premises and held meeting at the corporate debtor's office. Corporate debtor was going concern engaged in the business of operating Chartered Aircrafts....
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....n between the parties, the adjudicating authority was required to look into the pleadings and material to find out true nature of the transaction? V. Whether FIR 50/2019 lodged by Religare Finvest Ltd. subsidiary of the financial creditor and the allegations made therein and subsequent proceeding in reference to the FIR has any relevance in the transaction which was subject matter of issue in Section 7 application? VI. Relief, if any, to which the appellants are entitled in these appeals. Question No.(I) 10. Learned Counsel for the Respondent No.1 has questioned the locus of the Appellants to file the Appeal by two shareholders. It is submitted that the shareholders have no locus to challenge an order under Section 7 admitting the Corporate Debtor to CIRP process. Learned Counsel for the Respondent No.1 has placed reliance on three Member Bench judgment of this Tribunal in "Park Energy Pvt. Ltd. vs. State Bank of India & Anr.- Company Appeal (AT) (CH) (Insolvency) No.62 of 2023". The three- member bench of this Tribunal had occasion to consider the locus of shareholders to file an appeal against an order admitting Section 7 application. Three-member bench af....
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....ceeding under Section 7 and Section 9 at the behest of the shareholders, which has been answered in negative. Hence the question referred to us is answered accordingly." 11. The above decision of three-member bench is binding on us. We, thus, had to proceed on premise that Appellant cannot claim to have right to file an appeal as shareholder of the Corporate Debtor. Learned Counsel for the Appellant in response to the above objection raised by Learned Counsel for the Respondent No.1 has raised two submissions to canvass that Appeal filed by the Appellant is maintainable. Two submissions which have been advanced by the Learned Counsel for the Appellant to canvass locus of the Appellant is as follows:- (i) The Appellant No.2- RHC Finance Pvt. Ltd. having shareholding of 70% is also creditor of the Corporate Debtor which has been acknowledged in the financial statement of the Corporate Debtor. In the financial statement of the Corporate Debtor as on 31.03.2021 (Note 13), the Corporate Debtor has acknowledged the loan payable to Appellant No.2 to the extent of Rs. 1090.94 lacs. It is submitted that the Appellant No.2 being creditor is entitled to maintain the appeal in his ....
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....tory framework for appeals against orders of the Adjudicating Authority i.e., the NCLT, stipulating that 'any person aggrieved' by such an order may prefer an appeal to the Appellate Authority i.e., the NCLAT in this case. Further, Section 62 extends this right of appeal to the Supreme Court. 25. Similarly, Section 53B of the Competition Act provides that 'any enterprise or any person aggrieved' within the statutory framework may file an appeal against any order of the CCI to the Appellate Tribunal i.e., the NCLAT. Section 53T further extends this right of appeal to the Supreme Court against any decision or order of the NCLAT." 14. The Hon'ble Supreme Court held that after becoming in rem proceeding, the expression 'any person aggrieved' in the context of the IBC has to be held to be indicative of there being no rigid locus requirements to institute an appeal challenging an order of the NCLT before the NCLAT or an order of the NCLAT before Supreme Court. It was held that the expression 'any person aggrieved' appearing in Section 62 of the IBC must be understood widely and not in a restricted fashion. There cannot be any dispute to the proposition that any stakeholders i....
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....nder any law and payable to the Government or any local authority." (emphasis supplied) 46. In this context, it would be relevant to discuss the meaning of the terms "disburse" and "time value of money" used in the principal clause of Section 5(8) IBC. This Court has interpreted the term "disbursal" in Pioneer Urban Land & Infrastructure Ltd. v. Union of India [Pioneer Urban Land & Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 : (2019) 4 SCC (Civ) 1] in the following terms : (SCC p. 511, paras 70-71) "70. The definition of "financial debt" in Section 5(8) then goes on to state that a "debt" must be "disbursed" against the consideration for time value of money. "Disbursement" is defined in Black's Law Dictionary (10th Edn.) to mean: '1. The act of paying out money, commonly from a fund or in settlement of a debt or account payable. 2. The money so paid; an amount of money given for a particular purpose.' 71. In the present context, it is clear that the expression "disburse" would refer to the payment of instalments by the allottee to the real estate developer for the particular purpose of funding the real estate project i....
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....rom the actual legal rights and obligations (if any) which the parties intend to create." (emphasis supplied)" 18. In paragraph 51, the Hon'ble Supreme Court further has held:- "51. ....................The IBC recognises that for the success of an insolvency regime, the real nature of the transactions has to be unearthed in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors." 19. The present is a case where the Corporate Debtor in its reply to Section 7 has pleaded that transaction claimed by Financial Creditor is a fraudulent transaction and no financial debt is involved. In this context, it is useful to refer to the pleadings of the Corporate Debtor in reply to Section 7 application where Corporate Debtor has clearly pleaded that there is no legally recognise financial debt owed by Corporate Debtor to Financial Creditor. Detailed pleadings have been made to that effect in paragraph 2. After detailed pleadings with respect to transaction relying on the judgment of the Hon'ble Supreme Court in "Phoenix ARC Pvt. Ltd." (Supra) where it was pleaded that the transaction referred to in the pres....
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....approval of the shareholders contemplated under Section 10 of the Code, as has been noted by us separately hereinafter. (d) There is strong argument that the present transaction is a collusive transaction between the Corporate Debtor and the Financial Creditor, and the only person aggrieved are the public shareholder like the Appellant. 46. We have noted the contentions of both sides and find that the arguments presented by Respondent do not come in the way of the Appellant to be considered as an aggrieved person. The Code doesn't bar the Appellant to file an appeal. Section 61 of the Code clearly states that notwithstanding anything to the contrary contained under the Companies Act, 2013, "any person aggrieved" by the order of the AA under this part may prefer an appeal to the NCLAT. The shareholders are the Appellant in this case and they are aggrieved by the order of the AA and interpreting the law in it widest terms and not in a restricted manner, we come to conclusion that the appellants have the locus to file an appeal and their appeal is maintainable. Even otherwise, we find that there are serious allegations of fraudulent initiation of CIR proceedings,....
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....t of Rs. 184 Crore. It cannot be said that Appellant- Daiichi Sankyo Company Limited has no claim against the Corporate Debtor. We have already noted the objection raised regarding locus of Daiichi Sankyo Company Limited in our order passed on 28.11.2023 in the appeal. The above reason given by us in the above order are reiterated for holding that Appellant- Daiichi Sankyo Company Limited has locus to file the appeal. 24. Learned Counsel for the Appellant has further relied on the judgment of the Hon'ble Supreme Court in "Independent Sugar Corporation Ltd." (supra) where Hon'ble Supreme Court has held that no rigid locus requirement is there under Section 61 of the IBC in context of a person aggrieved. Learned Counsel for the Appellant has further relied on the judgment of this Tribunal in "Hytone Merchants Pvt. Ltd. vs. Satabadi Investment Consultants Pvt. Ltd.- Company Appeal (AT) (Insolvency) No.258 of 2021" where this Tribunal held that the concept of the corporate entity was evolved to encourage and promote trade and commerce but not to commit illegalities or to defraud people. In paragraphs 39 and 42 of the judgment, following was held:- "39. Thus, it is clea....
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....d disbursement to the Corporate Debtor by Financial Creditor was not for time value of money and the disbursement was not for any lawful purposes with intent of repayment but was nothing more than instance of financial layering of money for some fraudulent purpose on part of the erstwhile management of the Financial Creditor. We need to notice certain pleadings which have been made by the Corporate Debtor in reply to Section 7 proceeding. Very first objection which was taken in the reply was that there is no legally recognise financial debt owed by the Corporate Debtor. It was further pleaded that the amount of Rs. 3.60 Crore which was remitted from Religare Arts Investment Management Ltd. on 31.03.2009 was immediately remitted on the very same day to Religare Finvest Ltd., the NBFC arm of the Financial Creditor. It is useful to notice paragraph 2 of the reply. Paragraph 2 (i), (ii) & (iii) which is as follows:- "2. Firstly, neither is Religare Enterprises Ltd. a "Financial Creditor" of Ligare Aviation Ltd., nor is there any legally recognized financial debt owed by Ligare Aviation Ltd. to Religare Enterprises Ltd. for the following reasons: (i) The bank stat....
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....- "(iii) The Applicant has failed to disclose that with respect to the sum of Rs. 3,60,00,000/- which forms the majority of its present claim, and which was transferred to the Respondent by RAIML, on 31.03.2009, an identical transaction of Rs. 3,60,00,000/- was made by the predecessor in interest of the Respondent to another company Religare Finvest Ltd., which is a wholly owned subsidiary of the Applicant. A true copy of the excerpts of the bank statement dated 30-31.03.2009 of the Respondent showing the mirror transactions is annexed hereto as ANNEXURE R-6." 28. In paragraph 8, 'submissions on merit' the very first heading of the submission is as follows:- "8. SUBMISSIONS ON MERITS: In these circumstances, and in the specific facts set out more particularly below it is submitted that the transaction which forms the basis of the present petition is a sham, being one among the thousands of fraudulent transactions in relation to which the subsidiary companies of the Applicant as well as its erstwhile directors are currently under investigation by various law enforcement agencies:" 29. Corporate Debtor in its reply has specifically relied on the judgm....
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....invest Limited 36,000,000.00 31.03.2009 Religare Finvest Limited 30,000,000.00 31.03.2019 Religare Finvest Limited 27,000,000.00 31.03.2019 Religare Technova 57,000,000.00 31.03.2009 Religare Arts Investment Management Limited 3,60,00,000 31.03.2009 Religare Finvest Limited 3,60,00,000 Thus, it is more than amply clear that the present transaction, is one among numerous such transactions where funds were moved between various group entities, of the Respondent No.1. The same were not advanced for the time value of money, nor were they ever intended to be repaid, and hence could not have been construed to be a valid debt. Likewise the other transactions which formed the subject matter of the Petition under Section 7 were similarly tainted by fraud." 31. The above chart also clearly reflect the amount of Rs. 3.6 Crores received from Religare Arts Investment (Financial Creditor) on 31.03.2009 and by very next bank entry, the said amount was transmitted on the same day to Religare Finvest Ltd., NBFC arm of the Financial Creditor. The Hon'ble Supreme Court in 'Phoenix A....
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.... and the same was fraudulent purpose. In support of the plea raised by the Corporate Debtor, several materials including the bank statement dated 30.03.2009 and 31.03.2009 of the Corporate Debtor have been referred to and which were filed as Annexure R-6. In paragraph 9 of the order of the Adjudicating Authority, Adjudicating Authority has noticed the documents and materials relied by the Appellant. Adjudicating Authority in paragraph 10 of the judgment has given his analysis and finding. After noticing the definitions of debt, default, financial creditor and financial debt as well as Section 7(1), in paragraph 10 (v), the plea of the Corporate Debtor that there is no financial debt has been rejected. When we look into paragraph 10(v) of the order, the only reason given in paragraph 10 is "This contention is not sustainable as this particular submission is patently contrary to the terms of the six MoUs validly executed between the parties; none of the 6 MoUs at any of the clauses provide that the payment received by the Respondent was for onwards transmission to a third party". MoU which has been referred by the Adjudicating Authority where MoU dated 30.03.2009 entered between the ....
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....Corporate Debtor on same day was transmitted to subsidiary of the Financial Creditor- Religare Finvest Limited. We have already noticed the specific plea raised by the Corporate Debtor in its reply to Section 7 application where specific pleading of round tripping of the amount and transactions which is reflected in the bank account of 30.03.2009 and 31.03.2009 has been brought on record has specifically pleaded. Adjudicating Authority has not even looked into the plea that the amount was immediately transferred and did not remain even for 24 hrs with the Corporate Debtor. When the plea was raised before the Adjudicating Authority by Corporate Debtor that there was no financial transaction and transaction is something different and was for layering money and round tripping of the funds. The order of the Adjudicating Authority shows complete non-application to the pleas and materials brought on record. Determining the true nature of the transaction is essential for finding the nature of transaction for coming to the conclusion whether there is financial debt or not so as to proceed for directing insolvency. 34. There is one more reason given by the Adjudicating Authority in parag....
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....nnexure A-25 of the Appeal which is as follows:- "CORPORATE LOAN BALANCE CONFIRMATION LIGARE AVIATION LIMITED Plot. No. 345,3rd Flr, Udyog Vihar-II, Gurgaon - 122016 Dated: 31-Mar-2017 Dear Sir's, Our records show that your account at the close of business on 31-Mar-2017 had an unpaid Principal Balance due by you of Rs. 38237012.00/- (Closing balance as on 31-Mar-2017) and an unpaid net interest (after TDS) Balance of Rs. 3079521.00/- (Balance As on 31-Mar-2017). For the purpose of an audit of our books and accounts in the ordinary course of business, we would be obliged if you could compare the above balance with you records and confirm the balance appearing as on 31-Mar- 2017. Please note that transactions subsequent to the date of the above balance should be ignored for purpose of this confirmation. We would prefer you to use this form for the purpose of your reply, returning it intact. Yours faithfully, For RELIGARE ARTS INVESTMENT MANAGEMENT LIMITED, Authorized Signatory" ________________________________________________________ "Ref: LVL/31-Mar-2017/MOU1348-R ....
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....ooks of accounts including the balance sheet. A perusal of the aforesaid would show that the statement of law contained in Bengal Silk Mills [Bengal Silk Mills Co. v. Ismail Golam Hossain Ariff, 1961 SCC OnLine Cal 128 : AIR 1962 Cal 115], that there is a compulsion in law to prepare a balance sheet but no compulsion to make any particular admission, is correct in law as it would depend on the facts of each case as to whether an entry made in a balance sheet qua any particular creditor is unequivocal or has been entered into with caveats, which then has to be examined on a case by case basis to establish whether an acknowledgment of liability has, in fact, been made, thereby extending limitation under Section 18 of the Limitation Act." 37. When at the first opportunity, the Corporate Debtor refused to confirm the balance as claimed by Financial Creditor, the said act of Corporate Debtor cannot be ignored by relying only on the entry in the balance sheet. As noted above, the basis of plea of the Corporate Debtor in its reply was that disbursement was not a genuine financial debt but it was for other fraudulent purpose which allegations are proved with the bank statement filed by ....
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.... • "Further, on account of enquiries received from such authorities, the new management of REL/the Complainant Company became aware of the SFIO and SEBI investigation into various related party and non-arms' length transactions involving REL and its subsidiaries, including the Complainant Company" • "It is evident from the conduct of these entities that they never intended to repay these purported loans to RFL..." • "It appears that the CLB book was used as a mechanism to fund promoter related companies. The funds were moved from the Complainant Company upon instructions of the promoters/their associates as and when required for investment and other purposes. The funds were never paid back and actually whenever any payment was due in these loans, either they were replaced by loans to some other group companies to repay the loan of existing promoter group company (circular movement of funds)". • "On 17 June, 2009 Rs. 34 crores were received in total from "Blue Line Finance", "GYS Real Estates", "Ligare Aviation", "Ligare Voyages", "Linear commercial" and "Sharan Hospitality" and on the same very day Rs. 54 Crores were funded to "Dio....
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....spondent No.1 has contended that FIR or any criminal proceeding is not relevant for determining for deciding Section 7 application and has relied on certain judgments which need to be noticed. 41. Learned Counsel for the Respondent No.1 relied on the judgment of the Hon'ble Supreme Court in "Sheikh Hasib alias Tabarak vs. State of Bihar- (1972) 4 SCC 773". In the above case, the Hon'ble Supreme Court was considering an Appeal against conviction of the accused under Section 395 of the IPC. High Court in the Appeal has acquitted two accused and maintain the conviction with regard to two accused Sheikh Hasib and Ashique Mian whose conviction was maintained, has filed an Appeal. The Appeal was allowed and in the judgment of the Hon'ble Supreme Court had occasion to consider the value of the First Information Report. In paragraph 4 of the judgment, the Hon'ble Supreme Court has stated following:- "The legel position as to the object, value and use of first information report is well-settled. The principal object of the first information report from the point of view of the informant is to set the criminal law in motion and from the point of view of the investigating authorit....
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....t be a ground to refuse an application under Section 7 if the application is complete and there is a debt and default. The 'I&B Code' being a complete Code will prevail over the other Acts and no person can take advantage of the pendency of the case to stall Insolvency and Bankruptcy proceeding filed under Section 7." 43. In the present case, filing of FIR and charge-sheet is not being referred for contending that Section 7 proceeding cannot proceed. Only reference and reliance by Corporate Debtor of the above proceeding is that allegation of fraudulent transaction which is being pleaded by the Corporate Debtor is also being averred by subsidiary of the Financial Creditor by filing an FIR and making same allegations of transaction being fraudulent. MoU being entered for fraudulent purposes and transaction was not genuine transaction. 44. Another judgment relied by Learned Counsel for the Respondent No.1 is "Kalpesh Ramniklal Shah vs. Mundara Estate Developers Ltd. & Anr.- 2023 SCC OnLine NCLAT 1871". In the above case, the loan which was given to the Corporate Debtor was sought to be questioned on the ground of violation of Section 295 of the Companies Act, 1956 which....
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....by the Adjudicating Authority on the ground of violation of Section 65. In the above case, this Tribunal has held that for proving the ingredient of Section 65 there has to be adequate pleadings and findings. In paragraph 8, following has been laid down:- "8. Observations made in paragraph 26 is that Financial Creditor is trying to settle personal scores and put undue pressure on the Corporate Debtor. We are of the view that for proving the ingredient of Section 65 there has to be adequate pleadings and findings. Observations made in paragraph 26 does not fulfil the requirement of Section 65 so as to reject the Section 7 application." 46. Learned Counsel for the Respondent further relied on judgment of this Tribunal in "Gets Cables Pvt. Ltd. vs. State Bank of India- 2024 SCC OnLine NCLAT 1324" which was a case where Section 10 application was rejected. Relying on Section 65, this Tribunal has held that for allowing Section 65 application, fraudulent and malicious intent has to be proved on some materials on record. In paragraph 33 of the judgment, following was observed:- "33. As observed above, the basis of rejection of Section 10 application is the finding by....
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....istrator of SEFL which needs no consideration or observation in the present proceeding." 48. The present is not a case where any proceeding under Section 66 are pending or even alleged. The above judgment in no manner helps the Respondent No.1 in the facts of the present case. Learned Counsel for the Respondent has relied on two more judgments of the Hon'ble Supreme Court namely- "Elegna Co-op. Housing and Commercial Society Ltd. & Anr. Vs. Edelweiss Asset Reconstruction Co. Ltd. and Anr.- 2026 SCC OnLine SC 82" where Hon'ble Supreme Court has held that debt and default being proved, admission of Section 7 application must follow. For the similar proposition, another judgment relied by Counsel for the Respondent is "Power Trust vs. Bhuvan Madan & Ors.- 2026 SCC OnLine SC 248" where Hon'ble Supreme Court in paragraphs 33 and 34 laid down following:- "33. Reiterating the ratio in Innoventive Industries Ltd. v. ICICI Bank [(2017) 205 Comp Cas 57 (SC); (2018) 1 SCC 407; (2018) 1 SCC (Civ) 356; 2017 SCC OnLine SC 1025.], this court in E.S. Krishnamurthy v. Bharath Hi- Tech Builders P. Ltd. [(2022) 230 Comp Cas 226 (SC); (2022) 3 SCC 161; (2022) 2 SCC (Civ) 129; 2021 SCC OnLi....
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....ment and when a transaction which is sham or collusive would only create an illusion that money has been disbursed whereas the real agreement between the parties something other financial debt. The Adjudicating Authority was required to consider all relevant materials on record to determine the nature of transaction which was impugned by the Corporate Debtor by making a specific plea in the reply as noted above. Adjudicating Authority even did not advert to the bank statement of 31.03.2009 and 31.03.2009 which reflected the transaction in the bank account of the Corporate Debtor which was nothing but layering of money for undisclosed purpose. Adjudicating Authority erred in observing that in none of the clauses of 6 MoUs it is provided that payment received was for onward transaction, hence, the contention of the Corporate Debtor is unsustainable. The above observation clearly indicate that Adjudicating Authority refused to advert to the materials on the record and has omitted to consider the materials on record which clearly proves that transaction where the money was disbursed to the Corporate Debtor was not a financial transaction. There were dozen transactions between 30.03.200....