2022 (7) TMI 1193 - AT - Insolvency and Bankruptcy

Seeking directions to the Respondents to provide for and make good to the Corporate Debtor for the losses caused due to the Respondent s indulgence in fraudulent transactions - Section 66 of the IBC - HELD THAT - The Respondent Nos. 9 and 10 were not the officers of the Corporate Debtor so as to any punishment can be awarded on them under Section 69. The direction in paragraph 29 insofar as Respondent Nos. 9 and 10 (Appellants before us) for prosecution under Section 69 is deserves to be set aside and is hereby set aside. Both the Appeals are partly allowed insofar as direction in paragraph 29 for instituting prosecution under Section 69 against the Appellants is concerned - Appeal disposed off.

Summary

Issues:
- Appeal against order passed by Adjudicating Authority under Section 66 of the IBC
- Challenge to the order based on a previous judgment by the Tribunal
- Dispute regarding fraudulent transactions and directions issued by the Adjudicating Authority
- Contention regarding the direction to institute prosecution under Section 69 against the Appellants

Analysis:
1. The Appeals were filed against the order passed by the Adjudicating Authority under Section 66 of the IBC, seeking directions for losses caused by fraudulent transactions. The Adjudicating Authority allowed the Application and directed the Appellant to make contributions. The Appellant challenged this order.

2. The Respondents argued that a previous judgment by the Tribunal had dismissed a similar Appeal, and hence, the current Appeal should also be dismissed. However, the Appellant contended that their case involved different issues, specifically regarding dues shown in the ledger maintained by them.

3. The Appellate Tribunal considered the submissions and records. It noted that the previous judgment by the Tribunal had found certain transactions as fraudulent under Section 66, including amounts written off as backdates during the financial year. The Tribunal affirmed the Adjudicating Authority's directions and dismissed the Appeal, stating that the ledger dues did not affect the findings of fraudulent transactions.

4. Lastly, the Appellant contested the direction in the judgment to institute prosecution under Section 69 against them, arguing that this section applies to officers of the Corporate Debtor. The Tribunal agreed with this contention and set aside the direction for prosecution against the Appellants, as they were not officers of the Corporate Debtor.

5. In conclusion, the Appeals were partly allowed concerning the direction for prosecution under Section 69 against the Appellants, which was set aside. The rest of the order was affirmed, and both Appeals were disposed of accordingly.