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TMI Blog2019 (4) TMI 1730X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Resolution Plan by the dissenting financial creditors. It is hereby ordered that the Corporate Debtor Company, viz., ABG Shipyard Limited, shall go into liquidation under Section 33(2) of the Code. The Resolution Professional Mr. Sundaresh Bhatt appointed for the Corporate Insolvency Resolution Process under Chapter II of the Code shall act as the Liquidator for the purpose of Liquidation in pursuant to Section 34(1) of the Insolvency and Bankruptcy Code, 2016 as approved by the CoC in their 22nd Meeting held on 01.03.2019 and his fees shall be as per the Schedule as contained in the IBC, 2016 - All the powers of the Board of Directors, Key Managerial Personnel and the Directors of the Corporate Debtor Company, as the case may be, shall cease to have effect and shall be vested in the Liquidator pursuant to Section 34(2) of the Insolvency and Bankruptcy Code, 2016 - That the personnel of the Corporate Debtor Company shall extend all assistance and co-operation to the Liquidator as may be required by him in managing the affairs of the Corporate Debtor Company. Application disposed off. - CP (IB) NO. 53 OF 2017 And IA NOS. 348 OF 2017, 139, 141, 204, 303 & 321 OF 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Bhatt, as the Interim Resolution Professional (hereinafter referred to as IRP ). 2.3 The Resolution Professional, so appointed, made public announcement on 05.08.2017 as per the provisions of section 15 of the Code calling the claims from the creditors in view of the order dated 01.08.2017 of this Adjudicating Authority. Consequent upon public announcement, IRP received claims from different creditors, members, stakeholders, employees, the workmen etc. 3. It is stated that appointment of the Applicant as the Resolution professional was confirmed by the members of CoC through electronic voting on 7th September, 2017 pursuant to the first meeting of the CoC held on 4th September, 2017. On confirmation of IRP as RP, Expression of Interest (In short EoIs) were invited through newspaper advertisement as well as on the website of the Corporate Debtor www. abgindia.com from the prospective resolution applicants, fixing 28th September, 2017 as the last date for submission of EoI. Pursuant to the advertisement and/or addendum to the advertisement, the Applicant received EoIs from the Liberty House Group Pte Ltd., ( LHG/Resolution Applicant ), Mahindra and Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening of the second bid which was proposed to be opened on 23.04.2018 subject to final outcome of the IA No. 139 of 2018. 4.5 This Tribunal vide its order 23rd August, 2018 in IA No. 139 of 2018 directed the Applicant (RP) to place both the resolution plans submitted by the Resolution Applicant before the CoC for voting and to consider the votes of the CoC on the basis of the percentage of voting of the CoC. However, added that the decision of the Committee of Creditors is subject to orders be passed in pending IAs before this Bench. 4.6 It is stated that 19th Meeting of the CoC was held on 17.12.2018 and as per the directions of this Tribunal, both the Resolution Plans, received from the Resolution Applicant in response to the First Bid Process and the Second Bid Process were put before the CoC together with the requisite documents including feasibility and viability reports and certificate on status of compliances etc. However, both the Resolution Plans were not approved by CoC with the requisite majority as required under section 30(4) of the IBC. 4.7 It is stated that vide order dated 18.02.2019, this Tribunal clarified that that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act in place of the existing Resolution Professional Mr. Sundaresh Bhatt. 5.2.2 It is stated by the applicants of the instant IA that sometime in the year 2013, the respondent No. 1 i.e. Corporate Debtor started facing financial difficulties and consequently, the payment of salaries and other dues payable to the employees and workmen (including the applicants) became irregular. In or about the year 2014, efforts were made for the revival of the Respondent No. 1 through the process of Corporate Debt Restructuring ( CDR ) and, subsequently, Strategic Debt Restructuring ( SDR ). However, the attempts did not result in bringing about a change in Respondent No. l's financial predicaments/difficulties. 5.2.3 It is stated under the approved CDR Scheme; the ICICI Bank, the Petitioner, was appointed as the Monitoring Institution on behalf of all the CDR lenders. The entire financial control over Respondent No. 1 was exercised by the Petitioner through a Trust and Retention Account ( TRA ) which was funded by Respondent No. 1 earnings as well as the finances released under the CDR Scheme. In spite of that, employee's and workmen's outstanding salari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per the provisions of the Section 12 of the Code was to be completed within a period of 180 days from the date of admission of the application to initiate such process. Subsequently, by an order dated 12th January, 2018 in CP(IB) No. 53 of 2017, the period of CIRP was extended by a period of 90 days beyond the 180 days. 5.3.3 The Resolution Professional has submitted the details of the preferential, under valued and fraudulent transactions and the same are enumerated hereunder: (a.1) The Respondent Company prior to the CIRP appears to have entered into a preferential transaction under Section 43(2) of the Code for the benefit of a creditor i.e. ABS Resources Private Limited ( ABGRPL ) having a vendor code 3000020 in the books of account of the Respondent company. The said preferential transaction does not appear to be in the ordinary course of business and the said transaction has the effect of putting ABGRPL in a beneficial position than it would have in the event of a distribution of assets, if any. The said transaction involves transfer of 7 vehicles by the Respondent company for a consideration, which seems to be significantly le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent from the financial position of ABGRPL that the said transactions were not in the ordinary course of business and it appears that ABGRPL does not possess the required financial capability to repay the amounts transacted by the Respondent Company. (b) The Respondent Company in the course of business had advanced certain amounts to its vendor i.e. Mahavir Distributor Private Limited ( MDPL ) having vendor code 232447 which appears to be for a fraudulent purpose as enumerated in Section 66 of the Code. Upon perusal of the books of account of the Respondent Company, it is ascertained by the Applicant that the Respondent Company had transferred an amount of ₹ 64,00,00,000/- to MDPL between the period of 21.04.2014 to 28.04.2014 through its bank account maintained with ING Vysya Bank Limited. Over and above the aforesaid transaction, the total outstanding balance as per books of account as at 01.08.2017 of the Respondent Company is an amount of ₹ 80,44,00,000/-. MDPL being a company involved in the business of commission agent, only earned revenue of ₹ 2.09 crores and having a negative net worth of ₹ 3.16 crores for the financial year 2015-16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licant upon scrutiny of the books of account of the Respondent Company observed that the Respondent Company had advanced an amount of ₹ 97,18,00,000/- in March, 2013 to NCWPL. From further scrutiny of the books of account of the Respondent Company, the Applicant could not ascertain the nature of transaction recorded against the account of NCWPL in the books of account of the Respondent Company due to non-availability of relevant data. The record of the transactions are in the form of journal entries i.e. clearing entries documents generally used in the accounting software SAP which appear to have been carried out with an intent to falsify accounts of the Respondent Company. Further, upon inspection of the records of NCWPL with the ROC, it has come to the knowledge of the Applicant that NCWPL was struck off from the ROC website. Further, NCWPL being a non-operation company had no revenue during the financial years 2009-10, 2010-11 and have failed to file its financial statements from the financial year 2011-12 onwards. The total outstanding due and payable by NCWPL to the Respondent Company as on 1st August 2017 is an amount of ₹ 97,18,00,000/-. Further two directors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we have decided that impugned transactions mentioned in Para 7(a), (c) and (d) are preferential transactions as defined in the sub-section 2(a) of Section 43 of the IBC as these transactions have been executed within the look back period of two years before the commencement of Insolvency proceeding and are therefore covered under section 43(4)(a). However, the transactions mentioned in Para 7(b) and (e) are not preferential transactions as these transactions have been executed before the look back period of two years before the commencement of Insolvency Proceeding. As per Section 43 of the IBC, 2016, the relevant period (the Look Back period) for the impugned transactions is starting from 31st July, 2015 and 1st August, 2017. 5.3.8 Accordingly, the IA filed by the Resolution Professional under Sections 43, 45 and 66 of the IBC is allowed . 5.3.9 No Order as to costs. IA 204 of 2018 5.4.1 The instant application has been filed by the applicant (Original Respondent) through the Resolution professional under the provisions of Section 60(5)(c) of the Code inter alia, for appropriate orders and directions in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st free. Therefore, the said transactions do not appear to be in the ordinary course of business. (b) The Respondent Company prior to the CIRP between the period of September, 2015 and March, 2016 the Respondent Company had transferred an amount of ₹ 199,66,25,200/- and an amount of ₹ 125,70,88,435/- was transferred prior to the period of April, 2015 through its various bank accounts in the form of loans and advances to Banal Investments and Trading Private Limited ( Banal ). Further, it is stated that Banal being a company engaged in the business of an investment company to purchase and sell shares, debentures, bonds etc. and earned no revenue for the financial years 2011-12 and 2012-13. Further, it is stated that Banal has a negative net worth of ₹ 19.06 lakhs. In view of the above, it is clear that the aforesaid business transaction was entered into between the Respondent Company and MDPL for a fraudulent purpose and not in the ordinary course of business. Further, upon inspection of the records of Banal with the ROC, it has come to the knowledge of the Applicant that Banal was struck off from the Registrar of Companies on 28.04.2017 on the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Based facilities sanctioned and availed by the Company, the Corporate Debtor, the details of the same are given hereunder: 1. FD No. 29100300001777 for ₹ 9,29,31,603/- 2. FD No. 29100300001820 for ₹ 43,51,081/- 3. FD No. 29100300001821 for ₹ 1,01,134/- Total for ₹ 9,73,83,818/- 5.5.3 On enquiry by the RP with the Respondent bank about the status of the aforesaid FDs, it was stated by the Respondent Bank vide their email dated 19.07.2018 that the aforesaid FDs were terminated and appropriated by the Bank on 02.08.2017 towards loan liablity. 5.5.4 It is stated by the Applicant that Respondent Bank was aware of the proceedings initiated by the ICICI Bank, the Financial Creditor against the Company, the Corporate Debtor and the Respondent Bank has also confirmed that as on 0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate orders and directions from this Tribunal in relation to transactions that can be classified as fraudulent/wrongful trading carried out by the Respondent Company, the Corporate Debtor and the transactions to defraud the creditors before the insolvency commencement date. 5.6.1 It is stated by the Applicant that upon review of the books and business of the Respondent Company, the Applicant has found that certain transactions appear to have been carried as fraudulent transactions, not in the ordinary course of business which may be covered under Section 66 of the Code. The details of the fraudulent transactions are listed herein below: (a) The Respondent Company prior to the CIRP appears to have entered into a fraudulent transaction under Section 66 of the Code with ABG Shipyard Singapore Pte. Limited (hereinafter referred to as ( ASSPL ) being a wholly owned subsidiary of the Respondent Company, incorporated on 8th February, 2010 in Singapore. (b) The Respondent Company in 2012 had invested in ASSPL by way of 42,97,100 1% redeemable preference shares of USD 1/- each at a premium of USD 9/- each amounting to USD 42,971,000/-. Further, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to the above investments made by ASSPL which were required to be paid-off on realization and further requested for time till 31st March, 2015. Thereafter, in the monitoring committee meeting held on 29th July, 2015 the Respondent Company was directed to obtain a certificate from a concurrent auditor regarding corresponding liabilities, in order to deliberate upon a decision for waiver. However, the said certificate from a concurrent auditor was not obtained by the Respondent Company. (f) As per the financial statements of the Respondent Company as on 31st March, 2017 the entire outstanding liability by way of investment in preference shares and loans and advances in ASSPL amounts to USD 66,153,329/- which is fully recoverable by way of liquidation of the investment. 5.6.2 The Applicant states that in view of the aforesaid findings, the Respondent Company had invested/given loans and advances to ASSPL, its wholly owned subsidiary and is entitled to recover an amount of USD 66,153,329/-. The aforesaid investments were to be recovered by the Respondent Company as recorded in the MRA and minutes of the meeting of the monitoring committee. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as Resolution Applicant at length along with the arguments extended by the respective Ld. Lawyers of the above numbered IAs. Also seen the documents annexed with the pleadings/and the IAs and replies/objections of the parties. IA 113 of 2019 - Application for Liquidation 7. The present IA is filed under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the Code ) by the Resolution Professional (hereinafter referred to as RP ) Mr. Sundaresh Bhatt, in respect of the Corporate Debtor Company, viz., M/s. ABG Shipyard Limited. 7.1 We have examined the merits of the present application by perusing the documents annexed therewith and also in the light of the aforesaid IAs. As per record, it is undisputed position in the present matter that this Adjudicating Authority, vide its order dated 01.08.2017, admitted the main Company Petition (bearing No. CP (IB) No.53/NCLT/AHM/2017 at the instance of Financial Creditor ICICI Bank. 7.2 Pursuant to the above stated admission order passed by this Adjudicating Authority, a Corporate Insolvency Resolution Process (hereinafter referred to as CIR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r requiring the corporate debtor to be liquidated in the manner as laid down in this Chapter; (ii) issue a public announcement stating that the corporate debtor is in liquidation; and (iii) require such order to be sent to the authority with which the corporate debtor is registered. (2) Where the resolution professional, at any time during the corporate insolvency resolution process but before confirmation of resolution plan, intimates the Adjudicating Authority of the decision of the committee of creditors approved by not less than sixty-six per cent of the voting share to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exports Ltd. Ors. wherein it is held that commercial aspects of a resolution plan are to be dealt with by an expert body such as the Committee of Creditors. It was held that the Hon'ble NCLAT had no jurisdiction to sit in appeal over the same, unless such decision of the Committee of Creditors is perverse or contrary to the provisions of the Code or any other existing law. In this regard, it is also pertinent to refer to the recent decision given by. 7.8 Therefore, it is hereby ordered that the Corporate Debtor Company, viz., ABG Shipyard Limited, shall go into liquidation under Section 33(2) of the Code, with following observation/directions: i. That the Resolution Professional Mr. Sundaresh Bhatt appointed for the Corporate Insolvency Resolution Process under Chapter II of the Code shall act as the Liquidator for the purpose of Liquidation in pursuant to Section 34(1) of the Insolvency and Bankruptcy Code, 2016 as approved by the CoC in their 22nd Meeting held on 01.03.2019 and his fees shall be as per the Schedule as contained in the IBC, 2016. ii. All the powers of the Board of Directors, Key Managerial Personnel and the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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