2019 (11) TMI 443 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - auction - CIRP was initiated fradulently in collusion with operational creditor or petitioner has perfected its right over property of the corporate debtor - Section 60(5) of the of Insolvency and Bankruptcy Code, 2016 read with Section 65 of the Insolvency and Bankruptcy, 2016 - HELD THAT - A perusal of record shows that Applicant at initial stage had filed an I A No. 190/2018 praying for similar relief and this bench vide its order dated 29.08.2018 has already rejected the Application by discussing that this Adjudicating Authority has no power under the IB Code to review or recall its order. Further it was also held that auction cannot be considered complete since the applicant/auctioneer failed to deposit the auction money within stipulated time, therefore auction purchaser did not acquire any vested right over the property of the Corporate Debtor. Therefore, the question of excluding the asset of corporate debtor does not arise at all. Further, for imposition of cost to the Operational Creditor under section 65 of the IB Code, applicant has failed to prove or brought any evidence to the knowledge of this tribunal that Operational Creditor with fraudulent or malicious intention other than bringing resolution for the company initiated the CIRP proceedings against the Corporate Debtor and has only orally alleged the same - This tribunal after ascertaining all aspect of the petitioner/operational creditor under Section 9 of IBC has admitted the petition and for lack of any proper evidence, hence this Adjudicating Authority does not feel appropriate to invoke section 65 of the IB Code. Lastly, Member of COC i.e. Bank of Baroda has already admitted that as being member COC when they came to know about admission of the CIRP process of the Corporate Debtor by this Adjudicating Authority they, vide their communication letter dated 24.07.2018 and 10.07.2018 informed the present applicant/auction purchaser to collect its bid amount. Thereafter, the bank vide its letter dated 03.10.2018 has remitted back bid amount to the Applicant, which was collected by the Bank from the auction purchaser. Application dismissed.

Summary

Issues:
1. Application filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 regarding fraudulent initiation of CIRP.
2. Exclusion of plant and machinery from insolvency proceedings.
3. Recall and setting aside of the order dated 10.05.2018.
4. Imposition of cost to the operational creditor under section 65 of the IB Code.
5. Liquidation of the Corporate Debtor.

Analysis:
1. The application was filed under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, alleging fraudulent initiation of Corporate Insolvency Resolution Process (CIRP). The High Court granted the petitioner liberty to approach NCLT if collusion or fraudulent initiation was suspected. The applicant, an auction purchaser, sought exclusion of plant and machinery from proceedings and the recall of the order dated 10.05.2018. The bank, a secured creditor, informed the applicant about the CIRP against the Corporate Debtor initiated by an operational creditor, leading to a moratorium period.

2. The RP and COC countered the application, stating that the sale confirmation letter issued after the CIRP initiation became void. They argued that the bank was unaware of the insolvency proceedings during the auction. The applicant defended the auction, stating it was held under the SARFAESI Act, 2002, and unaffected by subsequent IB Code proceedings.

3. The Tribunal rejected the application for recalling the order dated 10.05.2018, citing lack of authority to review or recall orders under the IB Code. It was clarified that the auction was incomplete due to the applicant's failure to deposit the auction money timely, thus not acquiring any vested rights over the property. Exclusion of the asset from the Corporate Debtor was deemed unnecessary.

4. The applicant's request for imposing costs on the operational creditor under section 65 of the IB Code was dismissed due to insufficient evidence of fraudulent or malicious intent. The Tribunal admitted the petition under Section 9 of the IBC after assessing the petitioner's claims but found no substantial evidence to invoke section 65.

5. The COC member, Bank of Baroda, admitted to informing the applicant about the CIRP initiation and subsequently refunded the bid amount collected from the auction purchaser. The Tribunal found the application devoid of merit and rejected it, concluding that the recall and setting aside of the order and liquidation of the Corporate Debtor were unwarranted.