TaxTMI 
TaxTMI 
2026 (7) TMI 253
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....seeking admission of the Respondent into the rigours of Corporate Insolvency Resolution Proceedings ("CIRP" in short). Aggrieved by the impugned order, the Appellant has preferred the present appeal. 2. Coming to the brief factual matrix of the present case at hand, the relevant points which require to be noticed is that the Appellant-Progfin Private Ltd. (hereinafter referred to as "Progfin"), a Non-Banking Financial Company which is a wholly owned subsidiary of Desiderata Impact Ventures Private Limited (referred to hereafter as "DIVPL") had extended loan facility to the Corporate Debtor-GBL Chemical Limited (hereinafter referred to as "GBLC") which is a wholly owned subsidiary of parent company, Ganesh Benzoplast Ltd (hereinafter referred to as "Ganesh Benzo") which was also the Corporate Guarantor of the Corporate Debtor in the present matter. DIVPL was acting as the Facility Agent of the Appellant. Basis an application received from the Corporate Debtor, the Appellant-Financial Creditor had purportedly sanctioned working capital limits to the Corporate Debtor by issue of a sanction letter followed up by a Facility Agreement purportedly backed by a Board Resolution of the Co....
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....on grounds of fraud and forgery. Aggrieved by the impugned order, the Appellant has filed the present Section 7 petition. 3. Making submissions on behalf of the Appellant, Shri Bishwajit Dubey, Ld. Counsel for the Appellant submitted that the transaction documents for the grant of the loan facility of Rs. 10 Cr. which was later enhanced to Rs. 15 Cr. were executed by Ramakant Pilani duly supported by Board Resolutions. Ramakant Pilani who was the executor of the transaction documents was also the co-founder of the Respondent-Ganesh Benzo and was also its CEO besides being the erstwhile Director of the Corporate Debtor and heading the Chemical Division of the Ganesh Group besides being closely related to Ramesh Pilani and Rishi Pilani. The Board Resolution of 17.10.2023 had been passed by the Corporate Debtor, specifically and singly authorising either Ramakant Pilani or any other director of the Principal Borrower to execute the original Facility Agreement following which the same was executed by him on behalf of the Principal Borrower for a working capital facility of Rs. 10 Cr. on 21.10.2023. Similarly, another Board Resolution of 16.10.2023 passed by the Respondent-Corporate ....
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....ncipal Borrower which had been executed by a sitting director and CEO of the Corporate Debtor and also the Corporate Guarantor, it was emphatically asserted that the Corporate Guarantor and the Principal Borrower cannot rightfully contend to be absolved of their liability under the Facility Agreement and the corporate guarantee. It was pointed out that the impugned order is contrary to the settled law laid down by the Hon'ble Supreme Court in Innoventive Industries Limited vs. ICICI Bank (2018) 1 SCC 407 and M. Suresh Kumar Reddy v. Canara Bank (2023) 8 SCC 387, which had categorically held that once the twin tests of financial debt and default are satisfied, the application under Section 7 must be admitted. An interse dispute between the company and Ramakant Pilani does not extinguish the company's liability towards the Appellant. 5. When the SBI bank-account statements and the KPMG report clearly show that money disbursed by the Appellant into the said SBI account was used to make third-party payments, including payment to vendors and also for repayment of loan to the Appellant towards their debt-liability, submission was pressed that this clearly satisfied the twin-test o....
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....n different versions of the same document besides missing signatures on different versions of the same document and mention of fictitious dates of Board Resolution meetings therein thus creating doubts about the authenticity and genuineness of the purported documents. It was submitted that the Board Resolution of 16.10.2023 of the Respondent-Corporate Guarantor and the Board Resolution of 17.10.2023 of the Corporate Debtor relied upon by the Appellant basis which the Facility Agreement and Deed of Corporate Guarantee were purportedly executed were fake and fabricated as no board meetings had taken place on those dates. Further the version of Facility Agreement filed by the Appellant in the Company Petition before the Adjudicating Authority and the version filed before this Tribunal in appeal and the one filed in the Writ Petition No. 5612 of 2024 before the Bombay High Court all carried different dates which discrepancy puts serious question marks on the veracity and genuineness of the transaction documents. Similarly, even the Deed of Corporate Guarantee which had been filed by the Appellant in the appeal before this Tribunal and that before the Adjudicating Authority in the Compa....
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....received by the Corporate Debtor and mere advancement of monies to a third-party fraudulent and bogus account does not either qualify to be a Financial Debt or renders the debt binding the Respondent-Corporate Guarantor. It was also submitted that FIR No. 0581 of 2025 was registered by Andheri Police Station, Mumbai in relation to cheques allegedly issued by Ramakant Pilani to the Appellant without authorization of the Respondent or Corporate Debtor. Reliance was placed on the judgement of this Tribunal in Ocean Deity Investment Holdings Limited vs. Suraksha Asset Reconstruction Limited in CA(AT)(Ins) No. 795 of 2021 wherein it was held that valid disbursement is said to have taken place only when money is no longer with the lender but with the borrower who then utilizes the money and that if there exists fraud in relation to the said transaction in question, such transactions do not create a "Financial Debt" under Section 5(8) of the IBC. It was also submitted that the amount allegedly received in the fraudulent bank account from the Appellant and other third-parties was further transferred online by one Manish Chaturvedi to another bank account of one Cardier Foods and Beverages ....
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....1.2024 while Supplemental Corporate Guarantee, also executed by Ramakant Pilani on 30.01.2024, was supported by a Board Resolution dated 24.01.2024. It has been claimed by the Appellant that in terms of the Facility Agreement the last disbursal was made to the Corporate Debtor on 09.02.2024 and the Corporate Debtor had also made their last part-repayment of debt to the Appellant on 08.02.2024 which clearly shows that debt was still due and payable. When the Corporate Debtor failed to make payment of the further outstanding amounts, the Appellant issued a loan recall and demand notice dated 15.04.2024 for immediate payment of Rs 15.44 crore. The Appellant also invoked the Corporate Guarantee and the personal guarantees and called upon the Corporate Guarantor and Personal Guarantors to fulfil the repayment liability in the event the Corporate Debtor failed in its obligations. It is the case of the Appellant that once debt and default stands established by documentary evidence, mere raising of allegations of fraud and forgery by the Corporate Debtor and Respondent-Corporate Guarantor cannot defeat their statutory remedy of invoking Section 7 under IBC. The presumption of debt and defa....
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....nt thus creating room for circumspection. 12. When we look at the material placed on record, we find that the original Facility Agreement dated 21.10.2023 had been executed by Ramakant Pilani on behalf of the Corporate Debtor. On the same date, a corporate guarantee had also been issued on behalf of the Respondent-Ganesh Benzo which Deed of Corporate Guarantee was also executed by Ramakant Pilani. The Appellant has however used multiple versions of the Facility Agreement on different occasions which are at variance with each other in terms of dates affixed thereon or the signatures contained therein. The Facility Agreement filed along with the Appeal is dated 21.10.2023 as placed at page 127 of the Appeal Paper Book ("APB" in short) while the Facility Agreement filed along with the Company Petition was dated 26.10.2023 as placed at page 271 of APB. The Facility Agreement dated 26.10.2023 submitted by the Appellant appearing at page 1058 of APB is not signed by the Appellant whereas the Facility Agreement of 21.10.2023 annexed to the Appeal is signed by the representative of the Appellant as placed at page 165 of the APB. Similar is the picture surrounding the Corporate Guarantee....
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.... review, Ten (10) Board meetings were held on May 25, 2023, June 19, 2023, August 11, 2023, September 4, 2023, November 7, 2023, November 27, 2023, December 5, 2023, December 20, 2023, January 29, 2024 and February 12, 2024. The details of number of meetings of the Board held during the year along with attendance are given in the Corporate Governance Report which forms part of this Annual Report. 14. We now come to the Board Resolution of Respondent-Corporate Guarantor dated 16.10.2023 as placed at page 328 of APB by the Appellant in respect of Deed of Corporate Guarantee. However, when we peruse the Director's Report for FY 2023-24, it shows that no Board meeting had taken place on this date as maybe seen at page 24 of Reply Affidavit of the Respondent. The Board Resolution of the Respondent-Corporate Guarantor dated 24.01.2024 for the Supplemental Corporate Guarantee as at page 1189 of APB is contrary to the Director's Report for FY 2023-24 which shows that no meeting had taken place on this date as maybe seen at page 24 of Reply Affidavit of the Respondent. Similar discrepancies are pointed out in respect of the purported Board Resolution of the Corporate Debtor of 25.01.2024....
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....des not being on the letterhead of Corporate Debtor were not even part of the records of the Respondent or Corporate Debtor and the quantities of the goods shown to be delivered as per each invoice was significantly more than the load carrying capacity of the vehicles mentioned therein. Additionally, another FIR No. 0315 of 2024 had been registered by Vanrai Police Station in respect of the transactions forming subject matter herein in which an employee of the Appellant, Yogesh Parab has been made an accused. This FIR also records that the correspondence by the Appellant was carried out by using fake email ids as at pages 534 and 554 of APB. As Ramakant Pilani had also provided three undated cheques in favor of the Appellant purportedly from the official domain of the Corporate Debtor being the "ganeshgroup.com", yet another FIR No. 0581 of 2025 was registered by Andheri Police Station, Mumbai for issuing cheques unauthorizedly by Ramakant Pilani to the Appellant without authorization of the Respondent or Corporate Debtor. 16. Besides the filing of FIR's, the Respondent and the Corporate Debtor jointly challenged the tenability of the fraudulent transaction by filing of Commerci....
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....ed that the Annual Report of the Respondent had clearly disclosed that money borrowed in the name of the Corporate Debtor seems to have been used for an untruthful purpose and therefore no financial liability should fall on either the Corporate Debtor or the Respondent. The Adjudicating Authority thereafter has relied on the judgment of the Hon'ble Supreme Court in Radha Exports (India) Pvt. Ltd. v. K.P. Jayaram (2020)10 SCC 538 wherein it has been held that disputes relating to forged signatures or fabricated records can be adjudicated upon evidence in a regular suit and not in proceedings under Section 7 of IBC since the latter proceedings are clothed with a summary jurisdiction. The Adjudicating Authority further held at para 29 that it lacked jurisdiction to adjudicate upon fraudulent transactions based on forged and fabricated documents. 19. The Appellant has assailed the finding contained at para 29 of the impugned order and contended that when Ramakant Pilani was the Director of the Corporate Debtor and the CEO of the Respondent-Corporate Guarantor at the relevant point of time when the loan had been sanctioned and he was duly authorised by the Board Resolutions to act as....
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....ection of such application, as the case may be." 30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date. It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise." (Emphasis supplied) 20. It was also added that the above view taken in Innoventive Industries judgement has been followed in E.S. Krishnamurthy v. Bharath Hi-Tech Builders (P) Ltd.(2022) 3 SCC 161 and in M. Suresh Kumar Reddy judgement. The same dictum of law propounded by the Hon'ble Apex Court in the above judgements permeate the judgment of this Tribunal in Allahabad Bank v. Poonam Resorts Ltd. in CA(AT)(Ins.) Nos. 1303 & 1304 of 2019 wherein it was held that the satisfac....
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.... Court in 'Phoenix ARC Pvt. Ltd.' (Supra). As we hold that these transactions were collusive in nature, they do not fall within the ambit of the definition of 'Financial Debt' as defined under Section 5(8) of the Code and therefore Suraksha, the Assignee, cannot be termed as a 'Financial Creditor' as defined under Section 5(7) of the Code....." 27. Keeping in view all the aforenoted Judgements and the documentary evidence on record, we are of the earnest view that merely because there is a 'debt' and a 'default' it cannot be construed that a Section 7 Application is required to be admitted. The Adjudicating Authority ought to have examined the 'nature of these financial transactions' having regard to the Investigation Reports which were filed by the Appellant herein, the violation of the Articles of Association and assessed whether the transactions were collusive in nature or not and used its discretion whether to admit such an Application or not, keeping in view the scope and objective of the Code. It is appropriate at this juncture, to rely on the Judgement of the Hon'ble Supreme Court in 'Embassy Property Development Pvt. Ltd.' Vs. 'State of Karnataka' (2020) 13 SCC 308....
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.... impugned order, before we return our findings on the applicability of these judgements to the present factual matrix, at this stage for easy referencing, we would like to first reproduce para 25 of the impugned order which reads as under: "25. As regards the Petitioner's contention regarding the facts relating to disbursement of the amount, consequent debt and default is concerned while one may agree with such proposition but the facts and circumstances surrounding such disbursements and consequent debt and default cannot be overlooked. The Petition under Section 7 filed by a Financial Creditor cannot be admitted unless the debt and default is established. In the present case though there is debt and consequent default but the same cannot be established against the Respondent herein in the wake of the surrounding circumstances which include the disbursement made into a bank account which is not the bank account authorizedly opened by the Principal Borrower, the Deed of Guarantee executed being claimed to be on account of fraud, the signatures and the Board Resolutions supporting such actions of opening bank account and executing Deed of Guarantee alleged to be fabricated.....
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....nd recorded that these circumstances have consequential impact on debt and default. 26. We are inclined to agree with the Adjudicating Authority that mere advancement of monies by the Appellant to a third-party fraudulent account does not ipso facto qualify as a binding financial debt on the Corporate Debtor or the Corporate Guarantor. The judgment of this Tribunal in Ocean Deity Investment Holdings Limited vs Suraksha Asset Reconstruction Limited in CA(AT)(Ins)No. 795 of 2021 wherein it has been held that valid disbursement of monies creating a debt arises only when the money is no longer with the lender but with the borrower who then utilizes the money clearly comes to the aid of the Respondent. The ratio of the above judgement of this Tribunal which is predicated on the ratio laid down by the Hon'ble Supreme Court in Phoenix ARC Private Limited vs. Spade Financial Services Ltd. & Ors. in (2021) 3 SCC 475 is squarely applicable in the present facts of the case in view of the multiple FIRs filed in the matter with employee(s) of the Appellant named therein and charge-sheet also having been framed in certain cases wherein an SBI employee has been arrayed as an accused in the fra....
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....e has been placed on the judgment of the Hon'ble Supreme Court in MRF Limited v. Manohar Parikkar (2010) 11 SCC 374 which is to the effect: 111. The doctrine of indoor management is in direct contrast to the doctrine or rule of constructive notice, which is essentially a presumption operating in favour of the company against the outsider. It prevents the outsider from alleging that he did not know that the constitution of the company rendered a particular act or a particular delegation of authority ultra vires. The doctrine of indoor management is an exception to the rule of constructive notice. It imposes an important limitation on the doctrine of constructive notice. According to this doctrine, persons dealing with the company are entitled to presume that internal requirements prescribed in the memorandum and articles have been properly observed. Therefore, doctrine of indoor management protects outsiders dealing or contracting with a company, whereas doctrine of constructive notice protects the insiders of a company or corporation against dealings with the outsiders. However, suspicion of irregularity has been widely recognised as an exception to the doctrine of indoor ....