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TMI Blog2020 (2) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... on induct the Applicant in the Committee of Creditors with voting share proportionate to its amount of claim; (b) That this Hon'ble Tribunal ascertain the constitution of the purported Committee of Creditors and thereafter disqualify/remove such members from the purported Committee of Creditors with voting share proportionate to its amount of claim ; (c) That pending hearing and final disposal of this Application, this Hon'ble Tribunal be pleased to stay the insolvency resolution proceedings in relation to the Corporate Debtor." 2. DECISIONS IN THE PAST :- Before we proceed to discuss on merits this Application, it is necessary to place on record the past history of this case happened on the occasion when the Petition filed by the Financial Creditor The Invex Private Limited (hereinafter in short Invex) submitted under section 7 of the I&B Code pending for Admission to take decision for commencement of Corporate Insolvency Resolution Process against the Corporate Debtor Dome Bell Electronics India Private Limited (hereinafter in short Dome Bell). As per the sequence, before the start of the hearing on Section 7 of I&B Code Petition, a mention was made to restrain the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties present this Bench hereby places on record an observation that the litigants are expected to be just, fair and truthful while representing a case by placing on record the complete information specially if any case is sub-judice before any Court of law. The Petitioner as well as the Respondent being duly represented by the Learned Counsels have concealed those facts which is unexpected from the responsible counsel. 7. Be that as it is, all the parties are in agreement that the Corporate debtor be restrained from dealing with any of its assets so that the rights and interest of the Financial Creditors be protected. Under exceptional circumstances narrated supra, this Bench hereby directs the Corporate Debtor M/s. Dome-Bell Electronics India Private Limited not to deal in any manner by transferring or alienating any of its assets as appearing in the Books of Accounts till further orders. 8. Matter be listed for hearing on 11.07.2018." 2.1 Thereafter main Petition (CP-IB-2051/NCLT/MB/2018), moved by 'Invex' in the capacity of 'Financial Creditor' seeking commencement of Insolvency Proceedings against 'Dome Bell' a 'Corporate Debtor', was he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s each at par aggregating to Rs. 1626 crores by the debenture trustee in favour of the applicant Nityank. The applicant Nityank has become the beneficial owner of the said debentures within the meaning of Debenture Trust Deed. It was agreed that the Hindustan Oil will be liable to pay default interest at the rate of 18% which have not been paid on the respective dates. In order to secure the payment obligation, the M/s. Dome-Bell i.e. the Corporate Debtor executed a corporate guarantee deed dated 30 December 2016 in favour of the Applicant M/s. Nityank. As a result, the M/s. Dome-Bell had guaranteed the payment obligation of the M/s. Hindustan Oil in relation to the debentures. Additionally, the payment obligation was partly secured by a share pledge agreement also dated 30 December 2016, entered into between the debenture trustee and certain shareholders of Videocon D2H Ltd, including the Dome-Bell in the said share pledge agreement. Under the said share pledge agreement M/s. Dome-Bell had pledged 44,38,400 equity shares of Videocon D2H Ltd in favour of the debenture trustee. Later on by a letter dated 13 September 2017 the Hindustan Oil informed the applicant that there had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the Dome-Bell to pay outstanding amount of Rs. 2035,83,00,000/-. 4.2 The allegation is that although the Company was fully conscious of its obligation towards the Applicant (Nityank) under the said Corporate Guarantee it had fraudulently entered into the impugned transaction. According to the Applicant, it was a sham transaction for the purpose of delaying Applicant's claim against the M/s. Dome-Bell under the said Corporate Guarantee. An apprehension has been expressed that Dome-Bell may create a Third Party right. The submission is that the Dome-Bell be restrained from creating any Third Party right in respect of its Assets. The Applicant has learnt that the Dome-Bell had made claim before the Dish TV for allotment of Equity Shares in exchange for identified Shareholding. The apprehension is that on receipt of the shares, the Dome-Bell may alienate shares or deal with those shares to defeat the recovery. In the light of the aforementioned background, this Application has been moved so that the Applicant be made an Intervener, or in the alternate, the Debtor Company be restrained not to pledge 3,40,00,000 shares in Videocon D2H in favour of the ECL Finance Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebit entry in the Bank Account of the Financial Creditor through which an amount of Rs. 8,58,00,000/- was transferred on 16.03.2011 through RTG in the account of Corporate Debtor (Dome-Bell). In respect of this transaction the Intervener is totally silent without casting any doubt. Rest of the transactions which are reported are complex dovetailed transactions, but merely because of their complexity do not put this transaction within the ambits of a "Fraudulent transaction". It is worth to make an observation that the Applicant was legally required to establish a direct nexus of his debt with the debt of the present Petitioner. No such nexus is established to conclusively prove that the Debtor Company Dome-Bell has any connection with regard to this very Debt with the Debt of Nityank. For granting intervention this should be a fundamental legal requirement. In the absence of direct connection or nexus of Nityank with the Debt in question in this Petition it is absolutely unfair to allow as an Intervenor. There could be business link in the past but that itself is no ground to allow Intervention because this Insolvency Code revolves around the Debt is question and the Default commit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng displayed glaring inconsistencies which had gone to the root of the Application's 'Maintainability'. According to the finding, it was puzzling as to how the Applicant and Respondent could be categorized as "Corporate Persons". A finding was given that the Applicant had also failed to furnish necessary Board Resolution affirming grant of Loan. The acknowledgements have raised questions about the bona fide of the parties and according to the Hon'ble Principal Bench, the transaction was stage managed with an ulterior motive. Since the present Petition has contained all such relevant information and transaction is duly corroborated by several evidences and confirmations, therefore, the case law as relied upon on all fours is not applicable. Likewise, the decision of Hon'ble NCLAT in the case of SREI Infrastructure Finance Ltd. v. Right Tower Pvt. Ltd. & Anr. (Company Appeal (AT) Insolvency) No. 38 of 2018) Order dated 20.02.2018 is on the issue of Privity of Contract on the part of the Intervener. The facts being not clear the Hon'ble NCLAT had restored the matter back to the file of the Adjudicating Authority by leaving the question open to decide the issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted, he can challenge the same before this Adjudicating Authority. The second petition against the same Corporate Debtor, after admission of the first petition is not maintainable." 2.3 The purpose of reproduction of the Orders passed in the past is that the alleged claim of this Applicant M/s. Nityank was duly considered and stood rejected as far as the Insolvency Proceedings are concerned. It is strange that the Applicant is moving again this Application at the stage when the Insolvency Proceedings have reached upto the stage of considering approval of a 'Resolution Plan'. Although this Applicant is indulged in repetitive litigation, nonetheless, this Bench can not do much but to express displeasure by cautioning the Applicant to avoid multiplicity of legal proceedings by filing Applications after Applications. 3. MERITS/FACTS OF THE CASE :- On merits the date wise summary as produced in the list of events can be summarised as under :- "30.12.2016 - The Corporate debtor had, by and under the Corporate Guarantee and Share Pledge Agreement both dated 30th December 2016 and other related transaction documents, secured the payment obligations of one Hindustan Oil Ventur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal against the Admission Order before the Hon'ble National Company Law Appellate Tribunal, being Company Appeal (Insolvency) No. 499 of 2018. The Hon'ble Appellate Tribunal heard the matter on 29th August 2018, and reserved it for orders after giving liberty to the parties to file their written submissions. 7th September 2018 - In accordance with the Public Announcement, and without prejudice to the Applicant's rights and contentions in respect of its challenge to the admission of the captioned Company Petition and the consequent appointment of the Respondent as the IRP, the Applicant submitted to the Respondent its claim and proof of claim, in Form C, by way of the Applicant's email dated 7th September 2018 addressed to the Respondent. Despite submission of the Applicant's claim against the Corporate Debtor, the Corporate Debtor has failed to verity and admit the Applicant's claims." 4. In this Misc. Application the Applicant has stated in the light of the foregoing discussion that on the date when Insolvency Proceedings commenced in respect of the Corporate Debtor viz. Dome Bell vide Order dated 21.08.2018 (supra), on that date an amount of Rs. 93 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me was not entered and disposed of by order dated August 21, 2018. 7. The Applicant has suppressed this material fact in the present Application filed before this Hon'ble Tribunal. It is submitted that on this ground alone the present Application needs to be dismissed in limine. A copy of the said order dated August 2, 2018, passed by the Hon'ble Delhi High Court is annexed hereto and marked as Exhibit-"DD". Further, the Respondent craves leave to refer to and rely upon the said order dated August 21,2018 passed in appeal No. FAO(OS) (COMM) 185 of 2018 when produced." 5.1 The Respondent RP has vehemently pleaded that numerous frivolous attempts have been made but the Applicant was always unsuccessful before several Judicial Authorities including the Hon'ble High Court. According to the Learned Counsel of the RP, the Applicant is a "Faux Company" facing investigation by SFIO for suspicious deposits and withdrawals of about Rs. 3178 Crores during demonetization period. As per the Reply the Applicant is part of the Essel Group and is wrongly interfering in the Corporate Insolvency Resolution Process of the Corporate Debtor with an attempt to succeed in a commercial disp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, now said Claim-B cannot be demanded as a genuine transaction that too, a financial debt. According to Learned RP it is a very complex situation and not a case of clear financial debt, therefore, rightly rejected. In the Reply the details of the transaction were narrated as it has already been narrated by Nityank Applicant. 5.4 The Learned RP has also drawn our attention on an Order of Respected NCLAT New Delhi titled as Nityank Infrapower & Multiventures (P.) Ltd. v. Invex (P.) Ltd. [2019] 101 taxmann.com 267 (NCL - AT), wherein the entire transaction was discussed in detail and thereafter it was concluded that the Appellant (Nityank) had failed to suggest that the Application under Section 7 filed by Invex was with malicious intent. The Appeal of Nityank was dismissed, for ready reference relevant paragraphs are reproduced below :- "JUDGMENT SUDHANSU JYOTI MUKHOPADHAYA J. The Respondent 'Invex Pvt. Ltd.' - ("Financial Creditor") filed an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (' I&B Code' for short) for initiation of 'Corporate Insolvency Resolution Process' against 'Dome-Bell Electronics India Pvt. Ltd. & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... debentures within the meaning of 'Debenture Trust Deed'. It was agreed that the 'Hindustan Oil' will be liable to pay default interest at the rate of 18% which have not been paid on the respective dates. In order to secure the payment obligation, 'M/s. Dome-Bell Electronics India Private Limited'- ('Corporate Debtor') executed a corporate guarantee deed dated 30th December 2016 in favour of the Applicant- 'Nityank Infrapower & Multiventures Pvt. Ltd.' As a result, 'M/s. Dome-Bell Electronics India Private Limited'- ('Corporate Debtor') had guaranteed the payment obligation of 'M/s. Hindustan oil' in relation to the debentures. Additionally, the payment obligation was partly secured by a share pledge agreement also dated 30th December 2016 entered into between the debenture trustee and certain shareholders of 'Videocon D2H Ltd.' including the 'M/s. Dome-Bell Electronics India Private Limited'- ('Corporate Debtor') in the said share pledge agreement. Under the said share pledge agreement 'M/s. Dome-Bell Electronics India Private Limited'- ('Corporate Debtor') had pledged 44,38,400 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocon D2H'. Pursuant to an oral agreement, it was agreed that the 'M/s. Dome-Bell Electronics India Pvt. Ltd. ' (Corporate Debtor') shall issue additional security to the Applicant of those identified shareholding. It was found by the Applicant that 'M/s. Dome-Bell Electronics India Pvt. Ltd. ' (Corporate Debtor') had pledged some of those shares to a third party after the default committed of non-payment. Through a correspondence it was found that the 'M/s. Dome-Bell Electronics India Pvt. Ltd. ' (Corporate Debtor') had pledged 3,40,00,000 equity shares out of the identified shareholding. According to the Applicant, the impugned transaction was entered fraudulently to defeat the Applicant's - 'Nityank Infrapower & Multiventures Pvt. Ltd.' claims. In a reminder notice the Applicant - 'Nityank Infrapower & Multiventures Pvt. Ltd.' had called upon 'M/s. Dome-Bell Electronics India Pvt. Ltd. ' (Corporate Debtor') to pay outstanding amount of Rs. 2035,83,00,000/-. 6. The allegation was that although the Company was fully conscious of its obligation towards the Applicant - 'Nityank Infrapower & Multiventures Pv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Limited v. Bank of Baroda & Anr.- Company Appeal (AT) (Insolvency) No. 82 of 2018 etc." 9. Therefore, supply of copy of pleading to an intervenor does not arise. This apart, in fact no affidavit or pleading is filed before the Adjudicating Authority but the requisite form such as, (Form-1) is filed for application under Section 7 or (Form-5) for filing application under Section 9. In the said format the applicants only provide the details as required as per the format which includes the name of the 'Corporate Debtor', 'Creditors', amount of 'debt' and debt of 'default' etc. along with relevant enclosures thereto. 10. For a petition under Section 65 of the 'I &B Code' or for alleged allegation of 'collusiveness', the party moving the application is required to prove the same. The Adjudicating Authority cannot pass any order in absence of any corroborating evidence or statement. 11. Section 65 of the 'I& B Code' deals with 'fraudulent or malicious initiation of proceedings' whereas Section 66 relates to 'Fraudulent trading or wrongful trading'. As per sub-section (1) of Section 65, if any person initiates t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 7. Both the sides were heard at length and the voluminous pleadings have also been discussed in detail in the light of annexed evidences and case laws relied upon. At the outset this Bench is of the view that the issue of the alleged claim has already been considered not only by this Bench but also by Hon'ble NCLAT, however, the nature of claim viz-a-viz Insolvency Proceedings was rejected. The entire matter is also subject to challenge before Hon'ble High Courts as referred in above paragraphs, thus demonstrating that the claim of the Applicant/Nityank is disputed one. All the judicial forums have gone in depth to understand the nature of transaction and several agreements to analyse the complexity of the dealings between number of parties involved in these transactions, however, almost unanimously denied the relief. 7.1 As far as the procedure laid down in Insolvency Code, 2016 is concerned, the same is simple and straight. A Financial Creditor is to submit a claim in respect of a Financial debt which is an ascertained liability due from the debtor. There are several types of "financial debts", as defined in section 5(8) of the Code. There should be an apparent "defau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst the transfer of total amount of Rs. 11,08,00,000/- almost 50% was returned as per the terms of the business deal narrated supra. This fact itself has proved that the money was not exchanged between the parties to earn interest but it was a convoluted business deal amongst the parties. The business deal was admittedly in respect of a Real Estate Project. The Petitioner had failed to complete the project. During the progress of the project initially, a sum of Rs. 50,00,000/- (Rupees Fifty Lakhs) was paid by the Respondent on 26.10.2010 vide a Cheque of Bank of India. Since the Respondent had also invested and in lieu 16 flats were to be purchased by the Respondent, therefore, further mutual arrangements have been entered between the parties. As per the Respondent Company there was negotiation and re-negotiation, as it generally happens in a business, among the parties which involved other business settlement as well. In this regard our attention was drawn on some previous transactions which involved Civil and Criminal Proceedings took place among the parties now again in litigation before us. Therefore, in terms of a part of the settlement the amount in question was paid back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not a financial debt as defined in the Code. 10. Keeping brevity in mind the case laws are not reproduced, however, on careful reading it is legally sustainable that, every business transaction is not a loan transaction so as to be held as "financial debt". Resultantly, following the law already laid down we find no force in this Petition. Hence Petition is dismissed, to be consigned to records." 8. It is important to note in this case that the impugned transaction between the two parties was in fact not a direct transaction in the nature of a transaction where the relationship between the two parties is of "borrower" and "lender". Rather as per the facts narrated hereinabove, even the transaction do not fall under any of the categories of list of Financial Debts as defined under sub-sections (a) to (i) of Section 5(8) of the Insolvency Code. Rather time and again during the proceedings it was asked to inform this Bench about the specific sub-section of Section 5 of the Code under which the Applicant is demanding the impugned transaction to be held as "financial debt". It is worth to note that the transaction as narrated in the above paragraphs was a very complex transaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... place that on occurrence of default on 12.04.2018 the Applicant invoked the pledge of 50,90,000 shares in Videocon D2H Limited. The Debenture Trustee sold the pledged 50,90,000 shares and remitted to the Applicant an amount of Rs. 1560.04 Crores realized through such sale, but leaving behind an amount of Rs. 348,43,00,000/-, alleged to be payable by the Corporate Debtor as on 21.08.2018. In respect of the said claim on Public Announcement under section 15 of the Insolvency Code this Applicant had lodged a claim before RP on Form-C dated 07.09.2018. Further it is informed in this Application that certain letters were exchanged however the RP kept the claim undecided. Meanwhile it has come to the notice of the Applicant that the Resolution Plan is pending for approval, hence moved this Misc. Application. 3. In Reply the RP has submitted an Affidavit wherein given several reasons justifying the rejection of the claim. In this affidavit it is submitted that the Corporate Debtor had in this regard, pledged its shares by a Share Pledge Agreement dated February 1, 2018, in favour of the Debenture Trustee to secure the non-convertible debentures issued by Hindustan Oil Ventures Limited ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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