2022 (7) TMI 1121 - Tri - Insolvency and Bankruptcy

Validity of order of CIRP obtained - allegation of fraud on the part of Financial Creditor (FC) - it is submitted that order of admission was obtained on the basis of fraudulent and manufactured documents for a fictitious and imaginary transaction in collusion with unknown third parties claiming to represent the Corporate Debtor without any authority, who fraudulently admitted liability though there was none - HELD THAT - It is very strange that the Financial Creditor and the Corporate Debtor had obtained orders of CIRP fraudulently and in complicity with each other by filing a collusive petition and later on settled the matter by payment of Rs.30 Lacs, which cheques although were given on behalf of the Corporate Debtor by some unknown person and are stated to have not been encashed by the Financial Creditor. Both the parties have given a somewhat shady picture which does not bring out a real truth in this matter. This matter needs to be further investigated. The entire transaction as narrated in the Section 7 application is plainly imaginary, concocted and fraudulent. The CD does not appear to have had any genuine liability towards the alleged FC and the entire documentation has evidently been prepared by the alleged FC in collusion with Videocon Group entities. The alleged documents disclosed in the Supplementary Affidavit of the alleged FC, far from helping its case, further demonstrate the fraudulent nature of the documents - the alleged FC is guilty of practicing and committing fraud on this Tribunal and therefore, as per Section 65 of the Code, penalty of Rs.50 lakh is imposed on the alleged FC and the CIRP stands vitiated and terminated due to the fraud committed. In any event, even apart from the aspect of fraud, the Section 7 petition was not maintainable due to the prohibition in Section 10A of the Code. Application disposed off.

Issues Involved:
1. Allegation of fraud in obtaining the CIRP order.
2. Validity of documents and transactions.
3. Applicability of Section 10A of the Insolvency and Bankruptcy Code (IBC).
4. Authority and representation of the Corporate Debtor.
5. Alleged settlement between the parties.
6. Imposition of penalties and further investigation.

Detailed Analysis:

1. Allegation of Fraud in Obtaining the CIRP Order:
The applicant, Infinity Infotech Parks Limited, a 50% shareholder of the Corporate Debtor, Videocon Infinity Infrastructure Pvt. Ltd., alleged that the Financial Creditor, Electroparts (India) Pvt. Ltd., obtained the CIRP order through blatant fraud. The order was passed by the Adjudicating Authority on 14.09.2021. The applicant claimed that the order was based on fraudulent and manufactured documents for a fictitious transaction, with unknown third parties fraudulently admitting liability on behalf of the Corporate Debtor.

2. Validity of Documents and Transactions:
The applicant argued that the documents and transactions presented by the Financial Creditor were fraudulent. It was noted that the Corporate Debtor had no directors since June 2019, and thus, no one was authorized to enter into any transactions or agreements. The alleged transactions, including a loan receivable assignment and balance confirmations, were deemed fabricated. The applicant highlighted that the Corporate Debtor, a real estate joint venture, had no business of lending and no means to undertake a liability of Rs. 30 crores.

3. Applicability of Section 10A of the Insolvency and Bankruptcy Code (IBC):
The applicant contended that the claimed date of default (15.12.2020) fell within the period prohibited by Section 10A of the IBC, which bars applications for defaults occurring between 25.03.2020 and 24.03.2021. Thus, the Section 7 application filed by the Financial Creditor was null and void.

4. Authority and Representation of the Corporate Debtor:
The applicant emphasized that no board or general meetings of the Corporate Debtor were held after March 31, 2017, and no statutory returns were filed post-2016-17. The Corporate Debtor had no directors since June 2019, making any representation or admission of liability unauthorized and fraudulent. The alleged representation by Mr. Soumik Ghosal, Advocate, and balance confirmations were also deemed fraudulent.

5. Alleged Settlement Between the Parties:
The applicant argued that the purported settlement recorded in the supplementary affidavit was a sham and a mala fide attempt to avoid scrutiny. The alleged settlement involved contradictory and fraudulent documentation, including a board resolution and consent terms. The Tribunal found the settlement to be an afterthought, designed to manufacture a subsequent date of default to circumvent Section 10A of the IBC.

6. Imposition of Penalties and Further Investigation:
The Tribunal concluded that the entire transaction narrated in the Section 7 application was fraudulent, with no genuine liability of the Corporate Debtor towards the Financial Creditor. The Financial Creditor was found guilty of practicing fraud on the Tribunal. Consequently, a penalty of Rs. 50 lakh was imposed on the Financial Creditor under Section 65 of the IBC, and the CIRP was terminated. The Tribunal also directed a full investigation into the transaction and ordered the Registry to send a copy of the order to the Secretary, Ministry of Corporate Affairs, Central Government for further action.

Conclusion:
The Tribunal found that the CIRP order was obtained fraudulently, with fabricated documents and unauthorized representations. The Section 7 application was deemed null due to the prohibition under Section 10A of the IBC. The alleged settlement was found to be a sham, and a penalty was imposed on the Financial Creditor, with directions for a full investigation into the fraudulent actions.

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