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2022 (1) TMI 571 - AT - Insolvency and BankruptcyPreferential transaction - Maintainability of the Avoidance Application - Corporate Debtor constitute preferential transaction as per Section 43 of the I B Code or not - no contention can be raised that the shares are an asset of the Corporate Debtor and that they were taken over by the Resolution Plan - HELD THAT - This Tribunal opines that there shall be no interim order and that the contentious factual and legal issues/controversies (centring around the Appeals), require a detailed final hearing, of course, after providing due opportunities to all the parties (including unserved Respondents) to complete the pleadings, in the instant Appeals, like filing of Replies, Rejoinders , etc. Let notice be issued to Respondent No.4 to 11 in Comp Appeal (AT)((CH)(Ins) No.1/2022 and Respondent No.3 to 9 in Company Appeal (AT)(CH)(Ins) No.9/2022 through speed post returnable on 29.2.2022. Requisites alongwith process fee be paid within three days from today. If the Appellant provides the Emails ID of the Respondents, let notice be issued through Email also. The Office of the Registry is directed to List the matter on 28.02.2022.
Issues Involved:
1. Preferential Transaction under Section 43 of the I&B Code 2. Jurisdiction and authority of the Adjudicating Authority 3. Validity and legality of the Share Pledge Agreement 4. Locus standi of the Appellant 5. Interim relief and injunction requests Issue-wise Detailed Analysis: 1. Preferential Transaction under Section 43 of the I&B Code: The Appellant argued that the Adjudicating Authority erred in dismissing the Miscellaneous Application by concluding that the transaction did not constitute a 'preferential transaction' under Section 43 of the I&B Code. The Appellant contended that the Adjudicating Authority failed to consider the tests and queries formulated by the Supreme Court in the Anuj Jain V Axis Bank Ltd case. The Appellant also highlighted that the Information Memorandum and Balance Sheets did not disclose any encumbrance related to the shares of the 3rd Respondent held by the Corporate Debtor, indicating a preferential transaction. 2. Jurisdiction and Authority of the Adjudicating Authority: The Appellant submitted that the jurisdiction for 'Avoidance of Transaction' is exclusively conferred on the Adjudicating Authority, and Section 63 of the I&B Code bars parties from approaching any other forum. The Appellant pointed out that the Adjudicating Authority's observation in paragraph 48 of the impugned order, which required parties to approach an appropriate forum for reliefs, was incorrect as the Adjudicating Authority itself should have provided the necessary reliefs. 3. Validity and Legality of the Share Pledge Agreement: The Appellant argued that the Adjudicating Authority committed an error in finding that there was a 'security interest' created, as no charge was created in the register of charges under Section 77 of the Companies Act, 2013. The Appellant also pointed out that the stamp paper on which the Share Pledge Agreement was executed was purchased by individuals not associated with the Corporate Debtor, indicating fabrication. The 2nd Appellant further highlighted discrepancies in the Balance Sheets and Director’s Reports of the 2nd Respondent, which did not disclose the purported loans, suggesting fraudulent transactions. 4. Locus Standi of the Appellant: The 2nd Respondent argued that the 1st Appellant/SNJ Distilleries Pvt Ltd, being an unrelated third party to the Avoidance Application, had no locus standi to pursue or prosecute the Avoidance Application. The 2nd Respondent cited the Venus Recruiters Pvt Ltd V. Union of India case, which held that the benefit of Avoidance Transaction cannot go to the Resolution Applicant and that the Resolution Applicant cannot prosecute an Avoidance Application. The 2nd Respondent also noted that the 1st Appellant was not impleaded in the Avoidance Application by the Adjudicating Authority, and its impleadment application was dismissed. 5. Interim Relief and Injunction Requests: The Appellant sought an interim order restraining the Respondents from alienating or encumbering the 4,00,00,000 shares held by the Respondents in the 3rd Respondent and from alienating or encumbering the assets of the Respondent. The 1st Respondent referred to the Madras High Court's interim direction in WP 3659/2021, which ordered that no further transaction in the shares should occur until the NCLT's disposal of the avoidance application. The 2nd Respondent argued that the shares were not part of the Corporate Debtor's assets when the Resolution Plan was proposed and that the present appeal was not maintainable. Appraisal and Conclusion: The Tribunal, after considering the contentions, opined that the contentious factual and legal issues required a detailed final hearing. The Tribunal directed that there be 'no interim order' and instructed the parties to complete the pleadings, including filing of 'Replies, Rejoinders,' etc. The matter was listed for a detailed hearing on 28.02.2022, with notice to be issued to the relevant Respondents and requisite processes to be completed within specified timelines.
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