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2026 (5) TMI 1679
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....en filed against the same impugned order dated 04.06.2024 passed by the National Company Law Tribunal, Mumbai Bench, Court-II (Adjudicating Authority) and for the sake of convenience are being disposed of by passing this common judgment. 2. CA (AT) (Ins) No. 1500 of 2024 has been preferred by the FINVIN Investor Pvt. Ltd., which is an assignee of the CD vide assignment deed dated 03.06.2024, challenging the impugned order dated 04.06.2024 passed by the Ld. Adjudicating Authority with regard to IA No. 1319 of 2020 moved under Section 43, 66, 67 and 70 of the Insolvency and Bankruptcy Code, 2016 (Code) in CP (IB) No. 1545 of 2019 whereby the application moved by the IRP has been rejected however the Resolution Professional has been directed to ascertain the amount paid to Orix Leasing and Financial Service India Ltd. (Appellant) of CA (AT) (Ins) No. 1581 of 2024 under Master Lease Agreement (MLA) from the records of the CD and take appropriate steps in accordance with law to recover the said amount from the Orix Leasing and Financial Service India Ltd. and from Kunal Jiwarajka, Laxmi Devi Jiwarajka, Sakshi Jiwarajka and Pratiksha Tradelinks. It is pertinent to mention here that....
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....sent a reply stating that the guarantee given by the aforesaid guarantors has not been invoked. 6. It is also reflected that the IRP of the CD also enquired with the Suspended Board of Directors regarding the whereabouts of the machineries vide her emails dated 26.12.2019, 10.02.2020 and 02.06.2020 and also enquired the whereabouts of the machineries from Pratiksha Tradelinks vide emails dated 15.05.2020 and 05.08.2020. 7. It is also reflected that Pratiksha Tradelinks did not sent any reply to the IRP while the Orix Leasing in its email dated 29.06.2020 stated that security deposit amount of Rs. 74,49,947/- was adjusted against the lease rental as outstanding on 31.10.2019 in the books of accounts on 31.03.2019. 8. An application being IA No. 1319 of 2020 was moved by the IRP of the CD before the Ld. Adjudicating Authority under Section 43, 66, 67 and 70 of the Code contending that the IRP undertook all the efforts to take the custody and control of all the assets of the CD including the equipment's, however the equipment's were found missing and the IRP apprised all the CoC members about it in the 2nd meeting of the CoC held on 17.12.2019 informing that the machineries b....
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....g a solitary email. 13. It is further stated by the IRP in the application that despite her email dated 15.05.2020 and 05.08.2020 the whereabouts of the machineries were not provided and upon analysis of the E-way bills and vehicle details there is a suspicion pertaining to the actual delivery of the equipment's to the CD as the vehicles shown to be used in transporting the equipment's were either not capable of transporting the equipment's or the E-way details could not be procured. 14. The IRP further stated that the entire exercise of purchasing the equipment's by way of lease mechanism and increasing the liability of the CD without there being any evidence of the supply of the machineries appears to be a transaction designed to de-fraud the creditors of the CD by the members of the Suspended Board of Directors in concerned with each other in collaboration with Orix Leasing with the intent that the machineries would stay with the Pratiksha Tradelinks and could not be used by the CD and thereafter would be declared untraceable and these transactions have been carried out in a pre-planned manner without any documentation with the purpose to de-fraud secured creditors and no ....
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.... to defraud the Creditors of the Corporate Debtor. Therefore, in our considered view, since Respondent No. 1 is a third party, prima fade an application under Section 66 of the IB Code, 2016 is not maintainable against it and, therefore, in our considered view no order of recovery can be passed as against Respondent No. 1. As the transaction does not fall within the four corners of Section 43 either, no order of recovery can be passed even by us in violation of the provisions of Section 43 of the Code. 23. So far as Respondent Nos. 2 to 5 are concerned, they are the suspended Board of Directors of the Corporate Debtor. Perusal of the record reveals that several notices were issued to them but they have not put an appearance nor filed any reply in this IA. It has been categorically stated by the Applicant in the application that the machinery allegedly lease financed by the Respondent No. 1 to the Corporate Debtor is not traceable. In a response to the query raised by the Liquidator, Respondent No.3 has stated in its reply vide email dated 10.01.2020, which is part of Exhibit (J), that since the machinery was defective in nature, it was returned to the supplier. From these ....
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....tice, the MLA was terminated in August, 2019 and the security deposit amount was adjusted on 28.08.2019 strictly in terms of the lease agreement. 19. It is further submitted that the impugned order has been passed without jurisdiction and is self-contradictory more so under Section 66 the proceedings are not maintainable against the third party and the impugned transaction does not fall within the ambit of Section 43. 20. It is further submitted that the adjustment of the security deposit has been done prior to the CIRP in pursuance of the demand notice dated 06.08.2019 on 28.08.2019 and upon termination of the lease a foreclosure statement was generated on 28.08.2019. 21. It is further submitted that although the foreclosure statement reflects termination date of 01.10.2019 the actual termination and appropriation of the security money has occurred on 28.08.2019 and it is only due to the automated system generating foreclosure statement on quarterly basis, in accordance with the MLA the foreclosure statement reflects a date of 01.10.2019 and therefore the adjustment has been made prior to the initiation of moratorium. 22. It is next submitted that the MLA is a genuine,....
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....am document and the chain of transactions between the parties are fraudulent and were entered into to de-fraud the creditors to siphon off funds of the CD including the appropriation of security deposit of Rs. 74,49,947/- during the commencement of moratorium, the application has been rejected, which cannot be sustained in the eyes of law and Ld. Adjudicating Authority for no reason has rejected the application filed by the appellant FINVIN. 26. It is further submitted that once a finding of fraudulent business is recorded, the duty of the Ld. Adjudicating Authority was to order for the recovery of the same. In this regard the law laid down by the Hon'ble Supreme Court in Phoenix Arc Pvt. Ltd. vs. Spade Financial Services Ltd. (2021) 3 SCC 475 and the law passed by this Appellate Tribunal in Tridhaatu Kirti Developers LLP vs. Arihant and Nenawati, liquidator of Royal Refinery Pvt. Ltd., (2023) SCC Online NCLAT 1583 has been placed. 27. It is further submitted that the expression any person occurred in Section 66 (1) of the Code covers the Orix Leasing which is the principle beneficiary of the fraudulent transaction and therefore is liable to contribute to the CD along with Ot....
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....o pay the Supplier-Respondent No. 2/ Pratiksha Tradelinks the entire amount of machines and equipment's which were to be delivered to the CD-JSK Marketing Ltd. and the CD was obliged to make rental payments to the appellant Orix Leasing. 34. It is also reflected that from the facts mentioned in the application filed by the RP that the Orix Leasing appears to have made payment to the supplier and get the equipment's procured as per the following details: 35. It is further reflected that Orix Leasing thereafter raised various invoices against lease finance assistance provided by it to the CD in respect of aforesaid equipment's/ machines, towards the lease rent and it is claimed by the Orix that till 1st April, 2019 the CD had paid regular lease rental payments on quarterly basis to the Appellant and thereafter committed a default and an amount of Rs. 34,26,479/- remains pending as outstanding lease rent on the CD. 36. The Orix Leasing is also shown to have issued demand notice dated 06.08.2019 to the CD demanding the above amount and thereafter stated to have foreclosed the facility by way of foreclosure statements each of date 15.10.2019 and also appropriated the security d....
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....application moved by her, that the CD under the MLA effects the Orix Leasing to purchase the equipment's with the intention that machineries/ equipment's would stay with Pratiksha Tradelinks and not to be used by the CD only to be declared untraceable, thereafter and the transactions have been carried out in a pre-planned manner without proper documentation with the purpose to de-fraud secured creditors of the CD and despite being repeatedly asked no valid explanation of the missing of the machineries/equipment's was furnished and therefore these transactions were not genuine transactions and in fact wrongful/fraudulent trading. 41. Perusal of the impugned order would reveal that at first the Ld. Adjudicating Authority in paragraph no. 19 of the impugned order noticed an email dated 29.06.2020 whereby it has been admitted by the appellant Orix Leasing that the security deposit of Rs. 74,49,947/- was adjusted against the lease rent outstanding as on 31.10.2019 i.e. during the moratorium commenced by the initiation of CIRP against the CD on 23.09.2019 and goes on to hold that the said security deposit amount has been appropriated during moratorium period and the appellant Orix is ....
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....deposit has been appropriated during the commencement of moratorium. 44. We notice that Ld. Adjudicating Authority has recorded a finding that since Orix Leasing is a third party no direction could be passed against it to contribute to the assets of the CD. 45. It has been submitted by Ld. Counsel for the FINVIN that in the proceedings initiated under Section 66 of the Code the Orix Leasing could very well be directed to contribute to the assets of the CD as he was found involved in the fraudulent transaction and in this regard the law laid down by this Appellate Tribunal in Royal India Corporation Ltd. (supra) has been relied, while Ld. Counsel for the Orix Leasing submits that in view of the law laid down by the Hon'ble Supreme Court in Glukrich and Ananth Subramanian ( Supra) the third party could not be directed to contribute to the assets of the CD under Section 66 of the Code. 46. Section 66 of the Code is important for our consideration and the same is reproduced as under: "66. Fraudulent trading or wrongful trading. If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor....
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....sonable prospect of avoiding the insolvency process in respect of the CD and such director or partner did not exercise due diligence in minimizing the potential loss to the creditors. Thus the necessary ingredients of invoking Sub Section (1) appears to be that the business of the CD has been carried on with intent to defraud creditors of the CD or for any fraudulent purpose. and for Sub Section (2) that Before the insolvency commencement date such director or partner knew or ought to have known that there was no reasonable prospect of avoiding the commencement of CIRP and such director or partner did not exercise due diligence in minimizing the potential loss to the creditors. Thus both these Sub Sections take care of two different factual situations. 48. In Piramal Capital and Housing Finance Limited v. Moons Technologies Ltd. & Ors. [(2025) ibclaw.in 120 SC]: [2025 SCC Online SC 690], observations made by the Hon'ble Supreme Court are reproduced as under: - "56. Thus, there is a clear distinction between the Avoidance Applications that may be filed by the Resolution Professional in view of Section 25(2)(j), for avoidance of transactions in accordance with Chapter III....
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....4 of 2022 Page 95 of 145 transactions, as the case may be. There is clear demarcation of powers of the Adjudicating Authority to pass orders in the Avoidance Applications filed by the Resolution Professional under Section 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 CD, under Section 66 falling under Chapter VI of the IBC. If the Resolution Professional has filed common applications under Sections 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 the orders in terms of the provisions of IBC." 49. This Appellate Tribunal in Swapan Kumar Saha v. Ashok Kumar Agarwal, (2025) ibclaw.in 911 NCLAT, while considering various cases on the subject held as under: "28......b. Can Section 66(1) of the Code be interpreted or invoked or made operational without recourse to Section 66(2) of the Code? Do they operate independent of each other or jointly?" 44. We further note that the next subsection 6....
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....alleged and evidence produced must satisfy the ingredients of this section and the facts from which the intention to defraud may be deduced must be proved to satisfy the conscience of the 'Tribunal' certainly on the scale of 'preponderance of probability'. However, no strait jacket formula can be formulated to fit in all factual situations and it will depend on the facts and evidence placed in each case to asses as to whether the particular transaction may be treated as fraudulent or not. 50. In Royal India Corporation Limited vs Mr NandKishor Vishnupant Deshpande (RP of RRPL) [(2024) ibclaw.in 304 NCLAT], dated 06.05.2024 passed in Company Appeal (AT) (Insolvency) No. 137/2021, wherein the same set of CD and Directors were parties and the transaction was similar, a coordinate Bench of this Appellate Tribunal opined as under: - "10.3 The Appellant had relied on the judgment of the Hon'ble Supreme Court in the matter of Gluckrich Capital Pvt. Ltd. vs. State of West Bengal & Ors.- 2023 SCC OnLine SC 1187 and in the case Usha Ananthasubramanian vs. Union of India- (2020) 4 SCC 132. On perusal of the judgment of the Hon'ble Supreme Court in the case of Gluckrich Capital Pvt....
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....f Tripura High Court in Smt. Sudipa Nath vs Union of India, 2023, SCC OnLine Tri 79 has been relied by the Appellant. In paragraph 19 of the judgment, following was laid down: "(19) Therefore, in legislature wisdom and as apparent from the text of 66(1) it is clear that firstly it confers no jurisdiction but declaring any transaction as void, even if fraudulent, but confers jurisdiction on NCLT to fix the liabilities on the persons responsible for conducting business of corporate debtor which is fraudulent or wrongful. Secondly section 66(1) contemplates an application thereunder only by the resolution professional and by none other. Thirdly section 66(1) also restricts the power of NCLT subject to being satisfy with pre-requisite that any business of the corporate debtor has been carried on with intent to defraud creditors or the corporate debtors or for any fraudulent purpose and if satisfied it powers to pass an order is only against such person who are responsible for the conduct of such fraudulent business of the corporate debtor with mens rea to make them personally liable to make such contributions to the assets of the corporate debtor as it may deem fit." 10. learn....
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....ions LLP & Ors. vs. Vineeta Maheshwari & Ors., (2025) ibclaw.in 1102 NCLAT this Appellate Tribunal noticed the facts of the case, as were reflected in para no. 16, 17 and 22 of the impugned judgment as under: "16. As noted above, in I.A. No.908 of 2023, reply, rejoinder affidavit, sur-rejoinder, affidavit and additional affidavits were filed. The Adjudicating Authority in the detailed order noticed the case of the Resolution Professional as well as the Respondents. The Adjudicating Authority has clearly noticed that by Section 13(2) notice the Corporate Debtor was prohibited from transferring, by way of sale, lease or otherwise, any of the Secured Assets and possession of the assets were taken on 29.08.2018 which observation has been returned in Para 22 of the order, which is as follows: "22. In the present case, the account of Corporate Debtor was classified as NPA on 27.09.2014 and the proceedings under SARFAESI Act were initiated on 8.9.2017 prohibiting the Corporate Debtor from transferring, by way of sale, lease or otherwise, any of the secured assets i.e. the assets/properties owned by the Corporate Debtor, the subject matter of the present IA. Further, symb....
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...., 1 Modi Baug Co-operative Housing Society, Ganeshkhind Road, Punc-411016 5. Mrs. Vidya Shyam Agarwal (Guarantor and Mortgagor) B-501, Modi Baug Co-operative Housing Society, Ganeshkhind Road, Pune - 411016 6. Mrs. Ritu Anand Agarwal (Guarantor) B-501, 1 Modi Baug Co-operative Housing Society, Ganeshkhind Road, Pune 411016 Sir(s), Sub.: Demand Notice under sub-section 2 of Section 13 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (hereinafter referred to as the "Act") read along with Rule 3 of the Security Interest (Enforcement) Rules, 2002 ("Rules")." "22. The submissions which has been much pressed by learned counsel for the LLP and learned counsel for the Suspended Director is that there being no pleading in I.A. No.908 of 2023 within meaning of Section 45 of I&B Code, the Adjudicating Authority could not have exercised jurisdiction under Section 49 to cancel the agreement dated 30.06.2021 and 03.08.2021. Learned counsel for the Appellant has placed reliance on judgment of Hon'ble Supreme Court in "Anuj Jain, Resolution Professional for Jaypee Infratech Ltd. vs. Axis Bank Limited, (2020....
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.... Thereafter with regard to applicability of Section 66 (1) of the Code this Appellate Tribunal in para no. 33, 34, 38 and 39 held as under: "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 Agrawal and Navin Shyam Agrawal, constituted Aaj Ka Anand LLP on 12.05.2021. The execution of Leave and License Agreement by Corporate Debtor to the LLP was done so as to keep assets of the Corporate Debtor away from creditors. The Resolution Professional in application under Section 66 has clearly pleaded that business of the Corporate Debtor has been carried out with intent to defraud the creditors of the Corporate Debtor. Execution of Leave and License Agreement and the Usage Agreement, dated 30.06.2021 and 03.08.2021, respectively was with intent to defraud the creditors of the Corporate Debtor. The said c....
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....ctions. 38. Learned counsel for the LLP challenging the order passed by the Adjudicating Authority directing for contribution has contradicted that in view of the order of the Hon'ble Supreme Court in "Gluckrich Capital P. Ltd. vs. State of West Bengal & Ors., 2023 SCC OnLine SC 1187", direction for contribution cannot be made to the third party. In Para 10 of the judgment following has been laid down: "10. We are of the considered opinion that in such circumstances, it is for the resolution professional or the successful resolution applicant, as the case may be, to take such civil remedies against third party, for recovery of dues payable to the corporate debtor, which may be available in law. The remedy against third party, however, is not available under section 66 of the IBC, and the civil remedies which may be available in law, are independent of the said section." 39.The present is a case where direction for contribution has not been made against the third party. The Suspended Director as well as both the Members of LLP were also Directors of the Corporate Debtor and direction for contribution in the impugned order has been made against all Responde....
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....019 (during the commencement of moratorium). Therefore, the security amount was forfeited by the Orix Leasing after the commencement of moratorium w.e.f. 23.09.2019. Thus we do not find any error in the observation of the Ld. Adjudicating Authority that the amount of security deposit was appropriated after the commencement of moratorium. However, as has been correctly opined by the Ld. Adjudicating Authority, the restitution of the security deposit in the assets of the CD cannot be ordered in these proceedings and for the said purpose an appropriate application is required to be moved by the RP before Adjudicating Authority. 54. It is also reflected that at the stage of filing of written submissions it was stated therein by the Orix Leasing that on account of non-payment of rentals the agreement was prematurely terminated in the month of August 2019 and foreclosure statements dated 28.08.2019 were prepared. However, the foreclosure statements could only be filed with the written submissions, before the Ld. Adjudicating Authority. Significantly, it is also reflected from the reply filed by the Orix Leasing precisely in paragraph 6 (j) that it has been stated therein that the secu....
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....r considered opinion these documents would certainly have bearing on the defence of the appellant Orix Leasing, in terms that these equipment's and machineries were in fact supplied to the CD and only on the basis of the fact these machineries and equipment's were not given by the Suspended Board of Directors in the custody of the RP, it was presumed that these machineries and equipment's were not supplied by the Pratiksha Tradelinks to the CD. 58. At this juncture, we also notice that despite the Orix Leasing in its written submissions filed before this Appellate Tribunal have categorically stated that on account of dispute occurred with the CD, the Orix Leasing has filed a petition under Section 9 of the Arbitration Act for possession of the machinery and equipment's before appropriate court and obtained an order on 09.09.2019 for appointment of a receiver and also approached the Police authorities for enforcement of the said order and have also initiated proceedings under Section 138 of the Negotiable Instrument Act before CMM South West Dwarka and proceeding under Section 95 of the IBC against Kunal Jiwarajka (Personal Guarantor) by filing petition CP IB No. 210 of 2021 and ....