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2023 (11) TMI 1134 - AT - Insolvency and BankruptcyContempt petition - CIRP proceedings - Preferential, undervalued, extortionate, fraudulent or wrongful trading - Pre-mature application or not - whether the Business Service Agreement (BSA) is valid and legal for which the Resolution Professional is cognizant and has initiated the Transaction Review Audit of various transaction to ascertain, whether any transaction fall under the ambit of preferential, undervalued, extortionate, fraudulent or wrongful trading under the provision of the Code? - HELD THAT - Taking into consideration the entire facts and circumstances prevailing at the time when the application was filed and at the time the order was passed that when the application was filed a serious question was raised about the legality and validity of BSA and the Adjudicating Authority was of the view that RP has already initiated transaction review audit of various transactions, therefore, the application was premature at that stage but the apprehension of the applicant therein was found legitimate and necessary directions were given to the RP. Since, the order dated 31.05.2023 by which the interim protection was granted to KCPL (Appellant) has been upheld by the Hon ble Supreme Court because the civil appeal filed against the order dated 31.05.2023 has been dismissed, therefore, it is directed that this order of stay dated 31.05.2023 shall continue till the decision of the applications filed under Section 45 and 66 of the Code by the RP. The Adjudicating Authority is further directed to make all efforts to decide as early as possible the applications filed under Section 45 and 66 of the Code by the RP to the earliest but not later than 3 months from the date of passing of this order - appeal disposed off. Second appeal - this filed by TNSI Retail Pvt. Ltd. on being aggrieved against the observation of the Adjudicating Authority recorded in the impugned order that the apprehensions of the Applicants are legitimate - HELD THAT - There are not much substance in this appeal because after the receipt of transaction review audit, prima facie it is evident that there are issues involved which have been brought to the notice of the Adjudicating Authority by the RP by filing of the applications under Section 45 and 66 of the Code, therefore, this appeal is found to be without merit and the same is hereby dismissed. Third appeal - HELD THAT - TNSI is a 100% subsidiary of FRL, therefore, the board can be changed by the RP or he can take it over and follow the direction issued in the impugned order - the contention of the Appellant not agreed with - appeal dismissed. Contempt petition - HELD THAT - Since the appeal is being disposed of as the entire matter is again under consideration by the Adjudicating Authority by virtue of applications filed under Section 45 and 66 of the Code by the RP, there are no substance in the present petition as well and the same is hereby dismissed. It is hereby ordered that the stay regarding the Appellant shall operate in respect of the area in its possession in the aforesaid Mall - Matter disposed off.
Issues Involved:
1. Validity and legality of the Business Service Agreement (BSA). 2. Interim relief and continuation of operations by KCPL. 3. Directions to the Resolution Professional (RP) regarding revenue and transaction audit. 4. Contempt petition for alleged violation of interim orders. 5. Intervention application for recalling/vacation of interim order. Summary: Issue 1: Validity and Legality of the Business Service Agreement (BSA) The primary issue was whether the BSA is valid and legal. The RP had initiated a Transaction Review Audit to ascertain if the transactions fall under preferential, undervalued, extortionate, fraudulent, or wrongful trading under the Insolvency and Bankruptcy Code, 2016. The Adjudicating Authority found the application by KCPL premature, as the Transaction Audit was not completed. The RP was directed to secure the revenue portion owed to KCPL in an escrow account until the audit's completion and to file appropriate applications if any transactions were found to be dubious. Issue 2: Interim Relief and Continuation of Operations by KCPL KCPL filed for interim relief to restrain TNSI from shutting down Foodhall stores. The Tribunal granted interim protection to KCPL, allowing them to continue operations in the Foodhall stores in NCR until the main appeal and related matters were decided. The Hon'ble Supreme Court upheld this interim order, directing it to continue until the applications filed under Sections 45 and 66 of the Code by the RP were decided by the Adjudicating Authority. Issue 3: Directions to the RP Regarding Revenue and Transaction Audit The RP was directed to take all necessary steps to secure the portion of revenue generated by the Foodhall business owed to KCPL in a separate escrow account. The RP argued that Foodhall business was in the hands of TNSI, a separate entity. However, the Tribunal noted that TNSI is a 100% subsidiary of FRL, and the RP could change the board or take over to follow the directions issued. Issue 4: Contempt Petition for Alleged Violation of Interim Orders KCPL filed a contempt petition against ten respondents for alleged violation of the interim order dated 31.05.2023. The Tribunal dismissed the contempt petition, noting that the main appeal was disposed of and the matter was under consideration by the Adjudicating Authority through applications filed under Sections 45 and 66 of the Code by the RP. Issue 5: Intervention Application for Recalling/Vacation of Interim Order Riveria Commercial Developments Ltd. filed an intervention application for recalling/vacation of the interim order dated 31.05.2023, claiming they were not heard. The Tribunal ordered that the stay regarding KCPL shall operate only in respect of the area in its possession in the Chanakya Mall. Conclusion: The Tribunal disposed of the appeals and applications with directions to the Adjudicating Authority to decide the applications filed under Sections 45 and 66 of the Code by the RP within three months. The interim protection granted to KCPL was ordered to continue until the decision of these applications. The second and third appeals, as well as the contempt petition, were dismissed. The intervention application was partially allowed, limiting the stay to the area in KCPL's possession.
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