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2023 (1) TMI 1053 - AT - Insolvency and BankruptcySeeking directions against the Respondents 2 3 for malicious and frivolous initiation of CIRP - HELD THAT - Having regard to the fact that the CIRP Process is over, the Liquidation Process is almost complete as on the date of Impugned Order i.e., 12.03.2021 and the Assets were sold at a good price and sale proceeds were distributed amongst the Shareholders, we do not see any ground to set the clock back or to interfere with the Orders of the Adjudicating Authority dated 27.02.2020 and 12.03.2021 respectively. Furthermore, a perusal of the material on record shows that the Appellant and Respondents 2 3 entered into a Memorandum of Settlement on 15.03.2016 and the Petition was disposed of vide Order dated 17.03.2016 - It is seen from the aforenoted Order that the remedy available for the Appellants was to file appropriate Proceedings before the Civil Court instead of trying to enforce the decree by way of an Application under Section 65 of the Court. The Adjudicating Authority has, rightly after going through the Prayers of the Appellants and material on record, and also considering the stage of the Liquidation Process, dismissed the Application. Appeal dismissed.
Issues Involved:
1. Validity of the initiation of Corporate Insolvency Resolution Process (CIRP) under Section 10 of the Insolvency and Bankruptcy Code (IBC), 2016. 2. Allegations of fraud and malicious initiation of CIRP. 3. Admissibility of the application under Sections 65, 72, and 77 of the IBC. 4. Liquidation proceedings and their validity. 5. Appellants' locus standi and shareholder status. Detailed Analysis: 1. Validity of the initiation of CIRP under Section 10 of the IBC: The appeals challenge the orders dated 12.03.2021 and 27.02.2020, passed by the National Company Law Tribunal (NCLT), New Delhi, which initiated CIRP against the Corporate Debtor, Prem Sons Super Steel Pvt. Ltd., under Section 10 of the IBC. The initiation was based on a special resolution and supported documents, leading to the declaration of moratorium and appointment of an Interim Resolution Professional (IRP). The NCLT noted that the CIRP was completed, and the Committee of Creditors (CoC) recommended liquidation. 2. Allegations of fraud and malicious initiation of CIRP: The appellants contended that the CIRP was initiated using forged and doctored documents without their knowledge, despite being 62.5% equity shareholders. They argued that the real purpose was to frustrate their rights under a Memorandum of Settlement dated 15.03.2016. The NCLT dismissed their application for recall and setting aside the CIRP initiation order, stating that there was no error apparent on the face of the record. 3. Admissibility of the application under Sections 65, 72, and 77 of the IBC: The appellants sought penalties against the respondents for fraudulent and malicious initiation of CIRP. However, the NCLT found no material evidence to suggest fraud or malice, stating that mere irregularity does not constitute fraud. The appellants were advised to approach the Insolvency and Bankruptcy Board of India (IBBI) for relief under Sections 65, 72, and 77. 4. Liquidation proceedings and their validity: The NCLT noted that the liquidation process was almost complete, with assets sold at a good price and proceeds distributed among shareholders. The appellants' application to declare the CIRP and liquidation process null and void was dismissed, as they had an efficacious remedy under Section 61 of the IBC to appeal against the liquidation order. 5. Appellants' locus standi and shareholder status: The respondents argued that the appellants had no locus standi as they had transferred their shares to the second respondent. The NCLT observed that the appellants had multiple dismissed applications and approached the tribunal with unclean hands. The tribunal found that the special resolution and board resolution attached to the Section 10 application were sufficient for initiating CIRP. Conclusion: The NCLT dismissed the appeals, finding no grounds to interfere with the orders dated 27.02.2020 and 12.03.2021. The tribunal held that the CIRP and liquidation processes were conducted appropriately, and the appellants' allegations of fraud and malicious intent were unsubstantiated. The appeals were deemed devoid of merit and dismissed accordingly.
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