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2022 (11) TMI 294 - AT - Insolvency and BankruptcyFraudulent initiation of insolvency proceedings by the Operational Creditor in collusion with the Corporate Debtor - It is submitted that Application under Section 9 was not a genuine Application - HELD THAT - The facts of the present case make it amply clear that object of filing Section 9 Application by the Operational Creditor was not for resolution of insolvency of Corporate Debtor, but was an attempt to stop the implementation of RERA order and to take back the Project from the Appellant. Mr. Raj Kumar, the Director of M/s. Rudra Buildwell Constructions Pvt. Ltd. has been challenging the orders passed by the RERA in First Appeal and Second Appeal on behalf of the Corporate Debtor. The Operational Creditor, thus, Mr. Raj Kumar, who has filed Section 9 Application as Director of M/s. Rudra Buildwell Constructions Pvt. Ltd. has clearly identified himself with the Corporate Debtor and was espousing the cause of the Corporate Debtor by challenging the order of the RERA - The sequence of the events and the various proceedings taken with regard to Project in question by the Homebuyers as well as by the Corporate Debtor, indicate that CIRP initiated by the Operational Creditor by filing Section 9 Application was for purposes other than for the resolution of insolvency. The reason given by Adjudicating Authority for rejecting argument of Section 10A was based on alleged acknowledgement letter dated 03.06.2021 received from the Corporate Debtor. When the date of default given by Operational Creditor in Section 9 Application is 31.03.2020, the mere fact that acknowledgement has been given by Corporate Debtor on 03.06.2021 accepting the debt, shall not change the date of default - the reasons given by the Adjudicating Authority that since acknowledgement is 03.06.2021, the date of default will become 03.06.2021 is not agreed upon. The Adjudicating Authority itself formed an opinion that it has prima facie satisfied that Application is barred by Section 10A and thereafter time was granted by the Adjudicating Authority to file additional affidavit. The additional affidavit gives only explanation of letter by the Corporate Debtor acknowledging the debt dated 03.06.2021. The letter dated 03.06.2021 was also before Adjudicating Authority, when order dated 29.11.2021 was passed dismissing the earlier Application, which was dismissed as withdrawn. The order dated 18.04.2022 is set aside and Company Petition No. IB-11/ND/2022 is dismissed as having been filed malifide for purposes other than resolution of insolvency of the Corporate Debtor - A penalty of Rs.25,00,000/- is imposed on Respondent No.2 - M/s. Rudra Buildwell Constructions Pvt. Ltd. through its owner Shri Raj Kumar to be paid within a period of one month by Bank Draft drawn in the name of Pay and Accounts Officer, Ministry of Corporate Affairs - Appeal allowed.
Issues Involved:
1. Fraudulent initiation of insolvency proceedings. 2. Validity of invoices supporting the insolvency application. 3. Compliance with Section 10A of the Insolvency and Bankruptcy Code (IBC). 4. Legitimacy of the order directing the handover of the project to the Interim Resolution Professional (IRP). Detailed Analysis: 1. Fraudulent Initiation of Insolvency Proceedings: The Appellant contended that the insolvency proceedings were fraudulently initiated by the Operational Creditor in collusion with the Corporate Debtor. It was argued that both entities were controlled by the same person, Shri Raj Kumar, and the initiation of the Corporate Insolvency Resolution Process (CIRP) was intended to defeat the rights of the Appellant. The Tribunal noted that the Operational Creditor, M/s. Rudra Buildwell Constructions Pvt. Ltd., and the Corporate Debtor, M/s PSA IMPEX Private Limited, were indeed controlled by Shri Raj Kumar. The Tribunal found that the Section 9 Application filed by the Operational Creditor was not for the purpose of insolvency resolution but to frustrate the implementation of orders passed by the Real Estate Regulatory Authority (RERA) and to take back the Project from the Appellant. 2. Validity of Invoices Supporting the Insolvency Application: The Tribunal observed that the invoices submitted by the Operational Creditor were proforma invoices prepared on a single day, 31.03.2020, and did not contain GST numbers or amounts. It was noted that the Central GST Act, 2017, and the Rules framed under it require tax invoices to be issued within a period of 30 days from the supply of service and to mention GST numbers and amounts. The Tribunal concluded that the invoices were prepared for the purpose of the case and were not in the ordinary course of business. Additionally, the ledger entries maintained by the Operational Creditor were found to be haphazard and not in the normal course of business. 3. Compliance with Section 10A of the Insolvency and Bankruptcy Code (IBC): The Appellant argued that the Section 9 Application was barred by Section 10A of the IBC, which prohibits the initiation of CIRP for defaults occurring during the COVID-19 pandemic. The Tribunal noted that the date of default mentioned in the Section 9 Application was 31.03.2020, which falls within the period covered by Section 10A. The Operational Creditor had previously withdrawn an application on the same grounds. The Tribunal rejected the Adjudicating Authority's reasoning that an acknowledgment of debt on 03.06.2021 changed the date of default. The Tribunal held that the date of default and the acknowledgment of debt are separate events and the application was indeed barred by Section 10A. 4. Legitimacy of the Order Directing the Handover of the Project to the IRP: The Appellant challenged the order dated 25.07.2022, which directed the Appellant to hand over the project to the IRP. The Tribunal found that the initiation of CIRP was vitiated in law, and therefore, all subsequent orders, including the order dated 25.07.2022, were unsustainable. The Tribunal did not find it necessary to consider additional submissions challenging the order dated 25.07.2022, given that the initiation of CIRP itself was fraudulent. Conclusion: The Tribunal allowed both appeals, set aside the order dated 18.04.2022, and dismissed the Company Petition No. IB-11/ND/2022 as having been filed with malicious intent. A penalty of Rs. 25,00,000 was imposed on M/s. Rudra Buildwell Constructions Pvt. Ltd. through its owner Shri Raj Kumar, to be paid within one month. Consequently, the order dated 25.07.2022 was also set aside.
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