2022 (2) TMI 1304 - Tri - Insolvency and Bankruptcy

Seeking furnishing of details of the transactions on the basis of which such misappropriation, unauthorized and illegal use of the funds advanced by the corporate debtor has made - seeking direction to respondents to make payment along with interest from the date of default payment of the corporate Debtor - HELD THAT - The amount as reflected in the books is not an advance paid by the corporate debtor, it is the sale consideration paid by the corporate debtor on behalf of the operational creditor which is required to be adjusted from the accounts of Operational creditor and not recoverable from respondent No. 1. The applicant denying the contention of the respondent No. 1 stated that the advance given by corporate debtor to the respondent No. 1 had no connection with the transaction between SRS limited and the Respondent No. 1. As per the share purchase agreement there is not even a single reference of the corporate debtor and no authorization was ever granted by the corporate debtor to the Respondent No. 1 Company to sell the shares of Hotline CPT Ltd. to SRS Limited, against payment made by corporate debtor to Respondent No. 1. Accordingly, there is no relation of the sale with the Corporate Debtor and the outstanding amount appearing in the books of corporate debtor is duly recoverable from all the respondents jointly and severally. The amount outstanding as per the ledger statement is due and recoverable from Respondent No. 1 to Respondent No. 3. All the respondents are hereby directed to pay amounts claimed by the Resolution Professional within 3 weeks from the date of the order. The Respondents shall be jointly and severally liable to make the entire payment as prayed by the applicant Resolution Professional. Application allowed.

Summary

Issues Involved:
1. Misappropriation and unauthorized use of funds by the Respondents.
2. Recovery of Rs. 50,00,000/- along with interest from the Respondents.
3. Misjoinder of parties.
4. Limitation period for the claim.
5. Validity of the claim based on the Share Purchase Agreement and other documents.

Issue-wise Detailed Analysis:

1. Misappropriation and Unauthorized Use of Funds:
The Applicant, appointed as the Interim Resolution Professional (IRP) for M/s. Saubhagya Ornaments Pvt. Ltd., claimed that Rs. 50 lakhs were outstanding and overdue from Respondent No. 1 to the Corporate Debtor. The Applicant alleged that the Respondents misappropriated and used the funds illegally, as evidenced by the ledger accounts and financial statements of the Corporate Debtor. The Applicant sent multiple communications to the Respondents, which were either undelivered or did not elicit a satisfactory response. The Respondents claimed that the funds were part of an internal arrangement and were used as sale consideration for shares transferred to M/s. SRS Ltd., but the Applicant denied any such authorization or connection with the Corporate Debtor.

2. Recovery of Rs. 50,00,000/- along with Interest:
The Applicant sought a directive for the Respondents to pay Rs. 50,00,000/- along with 18% interest from the date of default. The Tribunal found that the amount was indeed reflected as outstanding in the Corporate Debtor's books and was legally recoverable. The Respondents' defense that the amount was part of an internal arrangement with SRS Ltd. was rejected, as there was no evidence of authorization from the Corporate Debtor for such a transaction. The Tribunal directed the Respondents to pay the claimed amount within three weeks, holding them jointly and severally liable.

3. Misjoinder of Parties:
Respondent No. 1 argued that there was a misjoinder of parties, as Respondents No. 2 to 4 were unnecessarily added. They contended that the claim was only recoverable from Respondent No. 1, a distinct entity. However, the Tribunal did not find merit in this argument and held all Respondents jointly and severally liable for the payment.

4. Limitation Period for the Claim:
The Respondents claimed that the Applicant's claim was barred by limitation, as the transaction occurred on 18.02.2016 and the claim was first raised on 29.04.2019. The Tribunal, referencing the Supreme Court's ruling in "Sesh Nath Singh & Anr. Vs. Baidyabati Sheoraphuli Co-Operative Bank Ltd. and Anr.," held that the delay could be condoned if sufficient cause was shown. The Tribunal accepted the Applicant's contention that the date of payment was not the date when the amount became due, thus allowing the claim.

5. Validity of the Claim Based on the Share Purchase Agreement and Other Documents:
The Applicant argued that the Share Purchase Agreement provided by the Respondents did not mention the Corporate Debtor and lacked authorization for the transaction. The Tribunal found that the Respondents failed to provide substantiating evidence for their claims and that the outstanding amount was duly recoverable. The Tribunal rejected the Respondents' argument that the amount was part of an internal arrangement and held that the Rs. 50 lakhs were indeed an advance given by the Corporate Debtor, not connected to the sale of shares.

Conclusion:
The Tribunal concluded that the amount of Rs. 50 lakhs was outstanding and recoverable from Respondents No. 1 to 3. The Respondents were directed to pay the amount within three weeks, jointly and severally liable. The application was allowed and disposed of in favor of the Applicant.