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TMI Blog2019 (11) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the Principal Bench, New Delhi. 2. In the said petition, an application under Rule 11 of the 'National Company Law Tribunal Rules, 2016' was filed by Applicants ('Appellants' herein- 1st, 12th & 14th to 16th Respondents in the petition) with prayer to grant permission to the Appellant Company- 'M/s. Atlas Cycles (Haryana) Ltd.' to approach the consortium banks for release of title deeds in respect of non-core assets under the charge of 'Sonepat Unit' so as to proceed with its sale in accordance with the resolutions passed by the Board. 3. Before the Tribunal, the petitioners ('1st & 2nd Respondents' herein) brought attention that the resolution passed by the Board of Directors on 14th December, 2017 is under challenge in C.A. No. 179(PB)/ 2018. The said application was disposed of on 2nd August, 2018 and the Respondents ('Appellants' herein) were restrained from giving effect to the resolutions dated 14th December, 2017 and 24th February, 2018 in the light of the previous orders dated 24th August, 2015 and 7th September, 2015. 4. The Appellants ('Respondents' before the Tribunal) also filed C.A. No. 511(PB)/2018 and C.A. No. 618(PB)/2018 for seeking directions from this Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal granted Atlas five weeks time to file a reply and the matter is fixed for arguments on 15.11.2018. ii. M/s. Mahajan Tyre Company v. M/s. Atlas (Cycles) Haryana Ltd. being C.P.(I.B.)No.240/Chd/Hry/2018 : Vide order dated 05.10.2018 the Tribunal granted Atlas five six weeks time to file a reply and the matter is fixed for arguments on 13.12.2018. iii. M/s. Surindera Cycles v. M/s. At las (Cycles) Haryana Ltd. being C.P.(I.B.)No.261/Chd/Hry/2018 : Vide order dated 10.09.2018 the Tribunal issued notice on the application filed by the Operational Creditor and is fixed for appearance on behalf of Atlas on 14.12.2018. iv. Avon Ispat - S. 8 IBC notice received v. Berger Paints - S. 8 IBC notice received i. Over a period of time, 'Sahibabad' and 'Sonepat Unit' have contributed a sum of Rs. 45.51 crores and Rs. 26.68 crores respectively towards meeting outstanding liabilities of 'Malanpur Unit', pursuant to its closure under directions of the Board. A communication dated 04.03.2018 was sent to the Board by the CFO of the company which clearly indicates that the net outflow of funds from Sahibabad unit against such contributions was Rs. 29.18 crores while the net outflow o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit' continues to be zero. It was further alleged that the petitioners (1st & 2nd Respondents herein) have failed to furnish the requisite information sought by the Board of Directors and no information has been furnished regarding the outstanding liabilities to its suppliers. The information is necessary to prepare the defence in theproceedings initiated by 'Operational Creditors' under the 'Insolvency and Bankruptcy Code, 2016' in NCLT, Chandigarh. The 'Sonepat Unit' has not been able to clear its statutory liabilities later on liquidating the outstanding liabilities of suppliers. The Board of Directors has strongly felt that the only possible solution for the Respondent No. 1 company is to liquidate the non-core assets of the company so that additional funds could be generated and be utilized to stabilize the financial position which otherwise is getting adversely impacted. 9. Non-applicants/Petitioners (1st & 2nd Respondents herein) despite the opportunity granted, did not file any reply and their counsel addressed the argument on the ground that the application is not maintainable as the relief claimed has already been declined in the earlier proceedings. 10. The Tribunal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not inclined to grant any interim relief at this stage particularly when nothing has been placed on record to show that the applicant-respondent No. 1 company as such is unable to meet the liability of the Operational Creditors who have filed petitions under the Insolvency and Bankruptcy Code, 2016. 21. Mr. R.S Sun, learned senior counsel appearing for TDI Infratech Limited has submitted that one property at item No. 11 of the table may not be included as a part of the prayer made in this application as TDI Infratech Limited has acquired some interest in it. As we are dismissing the application the request made by Mr. Suri would not survive. We order accordingly." 11. With the aforesaid observations, the application was dismissed which is under challenge in this appeal. 12. For deciding the issue, it is desirable to notice the relevant background of the case as narrated by the Appellant and detailed below: 13. Late Rai Bahadur Janaki Dass Kapur had three sons, namely Sh. Bishambar Dass Kapur, Sh. Jaidev Kapur and Sh. Jagdish Kapur. It was considered expedient to split the management, ownership and control of the companies and assets jointly owned by the family in three eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also resolved that all the liabilities of 'Malanpur Unit' shall be met out of sale of assets of 'Malanpur Unit'/ 'ASTI'/ 'Atlas Auto' and the deficit if any shall be borne equally by 'Sonepat' and 'Sahibabad Unit'. It also resolved that pending sale/ liquidation of assets of 'Malanpur Unit', both 'Sonepat' and 'Sahibabad Unit' shall contribute a sum of Rs. 10 crores each to tide over the immediate liabilities which include statutory dues and bank liabilities to prevent any situation of the bank account of the company turning 'NPA'. 16. The arbitration proceedings between the Kapur family members culminated into an award dated 1st November, 2014 passed by the Hon'ble Sole Arbitrator. It is pertinent to mention that the Learned Arbitrator, in contradiction to his previous orders, directed division of the management, control and ownership of Appellant no. 1 Company. 17. After issuance of the arbitral award, 1st to 3rd Respondents herein, filed C.S. (OS.) No.3510 of 2014 before the Hon'ble Delhi High Court inter alia praying for a decree of permanent injunction restraining the defendants from in any manner changing the Management Committee of 'Sonepat Unit' and from interfering wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds as follows: "14. By the impugned order, the Tribunal has kept certain resolution in abeyance and directed to continue with the operation of the two orders dated 24th August, 2015 and 7th September, 2015. Two of the resolutions of the Board of Directors dated 14th December, 2017 and 24th February, 2018 have been kept in abeyance and the Board of Directors has been directed to facilitate the 'Sonepat Unit' in production to achieve the optimum level. The Applicant/Petitioner No.1 (Respondent herein) has also been directed to furnish all details sought by the Board of Directors of the Company relating to fund flow from the Government order and utilization thereof. 15. Learned Senior Cousnel appearing on behalf of the Appellants submits that if the Respondents are allowed to sign the cheques, many of the cheques will be bounced, as already bounced and it may result into initiation of 'Corporate Insolvency Resolution Process' against the Company. 16. Further, according to him, till the 'Sonepat Unit' starts with its production to achieve optimum level, the Company should be allowed to supply the products such as cycles and its parts from other units, which are producing in exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evel of production, it will be open to the Board of Directors of the Company to make available the products, such as cycles and other parts to 'Sonepat Unit' from other units for meeting the demand and supply in the market which is under the control of 'Sonepat Unit'. 'Sonepat Unit', in its turn, will keep an account of the products, such as cycles and other parts received from other units and after sale of such products will report the same to the Company as also the unit(s) from which the products such as cycles and its parts are supplied. The 'Sonepat Unit' will not sell any product such as cycles and its parts supplied by other units on credit. The 'Sonepat Unit' will transfer the amount generated from sale of product of other units to the unit concerned within 30 days of sale failing which, in default the present order passed by this Appellate Tribunal and order passed by the National Company Law Tribunal shall stand vacated. iv. Appropriate adjustment in the books of accounts should be maintained by the 'Sonepat Unit' with regard to products received from other units and it will communicate the month wise sale to the Company and unit concerned. v. The 'Sonepat Unit' and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion dated 18th September, 2018 was sent by 'Sahibabad Unit' forwarding price lists, etc. 26. Therefore, according to the Appellant, the Tribunal erroneously observed that no material has been placed on record to establish that the Company has no funds. It is submitted that the Tribunal failed to take note of the following facts: a. Bank position as on 31st March, 2019. i. Sanctioned limit - Rs. 19 crores ii. Drawing power- Rs. 18.54 crores iii. Availed limits - Rs. 18.14 crores b. All mutual funds exhausted except for a small art fund of Rs. 50 lakhs which is sub judice. c. Payments to suppliers overdue, more than 60 days - Rs. 57 crores. d. Position of funds as on 31st December, 2018 can be seen from the Letter dated 25th January, 2019 sent by statutory auditors stating that all mutual funds and other investments have been redeemed by 'Sahibabad unit'. 27. Learned counsel for the Appellant submitted that the Tribunal completely ignored the fact that A) all mutual funds and investments available had already been liquidated; B) all bank limits were fully exhausted; and C) no other funds available with the company to improve the liquidity. Thus, the observation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssistance extended to the company 20 crores Amount liable to be paid back to M/s. AGR Steel Strips P. Ltd., towards refund of advance received by Atlas against proposed sale of the said asset to M/s. AGR Steel Strips P. Ltd., in 2012. AGR has a lien on the said property till the amount of advance along with interest is not refunded to AGR. 13 crores Brokerage 0.82 crores TDS 0.35 crores Dues of HSIIDC, part refund to AGR Steel Strips and repayment of fixed deposits, etc. 2 crores The amount of Rs. 2 crores that was received as advance has already been utilized for payment of dues of HSIIDC, part refund to AGR Steel Strips and repayment of f ixed deposits. 3. Total outstanding of the company as of today to the vendors is as under: a. For supplies made to 'Sonepat Unit - About Rs. 25 crores i. No. of vendors who have filed applications under IBC - 12 ii. Amount claimed by the vendors who have filed applications under IBC -Rs. 10.39 crores iii. No. of vendors who have filed complaints under 'Negotiable Instruments Act' - 4 iv. Amount covered in complaints filed under 'Negotiable Instruments Act' - About Rs. 80 lakhs v. Salary, Wages, PF and other statutory lia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstacles and, therefore, the application was filed by 'Sonepat Unit' against the Board Resolutions but from the record, we find that the application under Sections 241-242 of the Companies Act, 2013 was filed with prayer for demerger by 1st & 2nd Respondents in their individual capacity (as petitioners) and not by so called 'Atlas Cycles (Sonepat) Limited' or 'Sonepat Unit'. 33. The 1st & 2nd Respondents ('Petitioners' before the Tribunal) have alleged obstacles created by Board of Directors, as detailed below: (i) 'Malanpur Unit' of the Company was shut in 2014. Banks recovered the liabilities of the 'Malanpur Unit' from the Bank accounts of the 'Sonepat Unit' due to which the credit limits of the 'Sonepat Unit' were exhausted and the unit was left with no working capital to run the operations of the unit smoothly. The Sahibabad Unit serves all the territories of 'Malanpur Unit' and takes all the profits despite the fact that 'Sonepat Unit' paid the liabilities equally. (ii) The Board of Directors has time and again passed Board Resolutions and has suspended the financial powers of the 'Sonepat Unit'. Vide Board Resolutions dated 6th April, 2015, 13th August, 2015, 14th Decem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Company in 2012. Since it is outstanding since the year 2012 and there is no urgency to pay the same and the Board of Directors should prioritise in repaying the funds due under IBC. 37. It is stated that Non- Core Assets of the 'Sonepat Unit' includes properties which have already been sold to the Trusts of the 'Sonepat Unit', and the payments have been received by the Board of Directors and the matter is currently pending before the Hon'ble Delhi High Court. It is informed that the Board of Directors have not approached the Banks for sale of Non- core assets and no condition has been imposed by the Bank to adjust Rs. 15 Crores as the Tribunal dismissed the application for sale of Non- Core assets. 38. 1st & 2nd Respondents have shown another option and taken plea that instead of paying to 'AGR Steel Strips Pvt. Ltd.' shall utilise the sale proceeds from 'Bawal' to repay Rs. 11 Crores to the 'Operational Creditors' under 'I&B Code'. It is further stated that 4th Respondent made some unauthorised withdrawals of appox. Rs. 15 Crores in his name in the year 2012-2013. 39. However, we are not inclined to decide the aforesaid question of withdrawal of any amount of one or oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord finds that there is no money payable or receivable to pay to the 'Operational Creditors'/ 'Financial Creditors' to save it from initiation of the 'Corporate Insolvency Resolution Process', the Tribunal or this Appellate Tribunal cannot go into commercial wisdom and financial matrix of the Company to decide whether a particular asset or one or other asset is required to be sold to satisfy the liabili ties of the company ('Atlas Cycle (Haryana) Limited') including the liabilities of 'Sonepat Unit' qua vendors. If the salvation for the company is improving liquidity through sale of non-performing assets of the company including the non-core assets that were proposed to be sold and servicing the territory, it is not open for the Tribunal or this Appellate Tribunal to prohibit the company from taking such decision i.e. from initiation of 'Corporate Insolvency Resolution Process'. 45. From bare perusal of Section 241 if read with Section 242 of the Companies Act, 2013, it will be clear that on an application made under Section 241, if the Tribunal is of the opinion that company's affairs have been or are being conducted in a manner prejudicial to the interest of the company and that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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