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2018 (12) TMI 1125 - Tri - Insolvency and BankruptcyCorporate Insolvency Resolution Process - non conducting the business due to certain RBI Circular dated March 13, 2018 - Whether the Corporate Applicant succeeds in proving default in payment of debt due to its creditors? - Held that - Annexure A-12 reflects the demand notices raised by the Income Tax Authorities. Truly, execution petitions are also seen filed by the operational creditors on the strength of an award passed in the year 2013 and it is pending for consideration before various courts. So, there is default in regards operational debt due to the statutory authorities and operational creditors. However, the operational creditors objected the application alleging that corporate applicant has filed this application to defraud all its creditors and to frustrate the orders passed by the Hon ble Supreme Court of India and the Hon ble High Court at Calcutta. Whether the application filed, is to defraud its creditors or not will be dealt with while answering point No. 2. The default in repayment of operational debt being proved, I can come to a conclusion that the occurrence of default as far as operational debt is concerned, stands proved in this case. Application with mala fide intention - Whether the Corporate Applicant has filed the application with malicious intent and to defraud the creditors? - Corporate Applicant has changed the name of the company and its registered office - Held that - Applicant has changed its name about three days prior to the institution of this Application; that the Corporate Applicant changed the registered address of the applicant before one day of the date of institution of this Application; that the applicant has suppressed the name change in the Form 6 and in the affidavit filed along with the application; that the Applicant failed in proving occurrence of default as defined under Section 10(1) of the code; that no materials brought out to prove existence of default as provided under section 3(12) of the code; that Annexure A-11, a letter of information obtained by the applicant three days prior to the institution of this Application for establishing that there was no repayment of the amount due; that none of the financial creditors of the Corporate Applicant has issued demand notice demanding repayment of the loan amount or any part of the amount allegedly due to them or recalled the loan before the date of filing the application; that none of the financial creditors declared the debt as NPA; that the financial statements produced on the side of the corporate applicant prove that the company was running in profit, and that there are pending litigations in between Operational Creditors, Financial Creditor and shareholders for recovery of money, are all circumstances which lead to a conclusion that the Corporate Applicant came forward/rushed to this Tribunal to misuse the chance of declaring moratorium so as to stay all the litigation for money recovery pending against it. The above said circumstances accordingly are sufficient to come to a conclusion that the corporate applicant filed the application with mala fide intention and with ulterior motive for purpose other than for the resolution. The two points are answered accordingly. Non-compliance of Sub-clause(c) to Section 10 (3) - Whether the application is maintainable for want of production of special resolution as per Section 10(3)(c) of the Code? - Held that - To sum up the proposition that was held in BK Educational Services (P.) Ltd. (2018 (10) TMI 777 - SUPREME COURT), that procedural law should apply retrospectively, that sub-clause(c) of the Code inserted to Section 10(3) can be construed as a procedural law by applying the proposition laid down in Thirumalai Chemicals Ltd. s case (2011 (4) TMI 489 - SUPREME COURT OF INDIA), it appears to me that sub-clause(c) is procedural and should apply retrospectively. Upon applying it as retrospectively, have no hesitation in holding that non-compliance of Sub-clause(c) to Section 10 (3) of the Code proves that one among the essential ingredients to be proved on the side of the corporate applicant has not been complied by the applicant.
List of Issues:
1. Whether the Corporate Applicant succeeds in proving default in payment of debt due to its creditors. 2. Whether the Corporate Applicant has filed the application with malicious intent and to defraud the creditors. 3. Whether the Corporate Applicant has changed the name of the company and its registered office with malicious intention to deceive the creditors. 4. Whether the application is maintainable for want of production of special resolution as per Section 10(3)(c) of the Code. 5. Reliefs and costs. Detailed Analysis: Issue 1: Default in Payment of Debt The Corporate Applicant, Sri. Munisuvrata Agri International Limited, filed an application under Section 10 of the Insolvency & Bankruptcy Code, 2016, citing inability to continue business due to an RBI circular and pre-existing debts. The corporate applicant claimed a default on financial debts amounting to ?536,92,00,000/-. However, the tribunal found that there was no sufficient evidence to prove the occurrence of default. The financial creditors did not produce loan agreements or demand notices, and the corporate applicant's financial statements indicated profitability. Therefore, the tribunal concluded that the corporate applicant failed to prove the existence of default on financial debt. Issue 2: Malicious Intent and Fraud The tribunal examined whether the application was filed with malicious intent to defraud creditors. The corporate applicant had changed its name and registered office shortly before filing the application, which was not disclosed properly. The tribunal found that the application was filed to misuse the moratorium period, thereby frustrating ongoing recovery proceedings by operational creditors and shareholders. The tribunal concluded that the corporate applicant filed the application with malicious intent and ulterior motives. Issue 3: Change of Name and Registered Office The tribunal considered the change of the company's name and registered office as an act to deceive creditors. The corporate applicant changed its name and address just days before filing the application, which was not properly communicated to creditors. This action was seen as an attempt to conceal the insolvency proceedings from creditors, supporting the allegation of malicious intent. Issue 4: Special Resolution Requirement The tribunal addressed the requirement under Section 10(3)(c) of the Code, which mandates a special resolution by shareholders for initiating insolvency proceedings. The corporate applicant did not produce such a resolution, as this requirement was introduced after the application was filed. However, the tribunal held that procedural laws apply retrospectively and non-compliance with this requirement rendered the application incomplete and non-maintainable. Reliefs and Costs Given the findings on the above issues, the tribunal dismissed the application filed by the corporate applicant under Section 10 of the Insolvency & Bankruptcy Code, 2016. The intervening applications filed by operational creditors and shareholders were allowed. The tribunal directed that each party bear their respective costs. Conclusion: - CA(IB) No. 635/KB 2018, CA(IB) No. 652/KB/2018, CA(IB) No. 722/KB/2018, and CA(IB) No. 778/KB/2018 were allowed. - CP(IB) No. 615/KB/2018 was dismissed. - Inv. A. No. 800/KB/2018 was dismissed. - No order as to costs. Urgent certified copies of the order were to be issued upon compliance with requisite formalities.
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