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TMI Blog2020 (2) TMI 1385X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The facts, in brief, are that the application under section 7 of IBC 2016 had been filed by the Financial Creditor against the Corporate Debtor as the Corporate Debtor had failed to pay the debt which had become due and payable. Order was passed by this authority admitting Corporate Debtor in CIRP and Moratorium under section 14 was made operational. In this background, the Ld. counsel for the applicant appeared and contended that said petition was an instance of collusive action just to deprive the applicants to get the shares of the Corporate Debtor held by the applicants as security for the loan of Rs. 30 crores which was given to Shanti Kumar Surani and Prabha Surana who held 100% shares in the Corporate Debtor in their name along with one Moksh Investors Pvt. Ltd. and one individual Pawan Kumar Surana. Ld. Counsel further pointed out that Mr. Shanti Kumar Surana and his wife Mrs. Prabha Surana had borrowed substantial sum of money from the applicants on the promise that they would transfer the immovable property owned by the Corporate Debtor to the applicant by transferring the Corporate Debtor company to them in order to liquidate their dues. However, when the shares alo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 7 could not be heard and decided. It was also contended that it is for this reason only the fact of such application being pending with this authority was not brought to the notice by the Corporate Debtor nor any attempt was made to defend proceedings under section 7 of IBC 2016. 5. According to the Ld. Counsel, fraud had been perpetrated and therefore, order dated 13.10.2019 passed by this Authority should be set aside. In support of such contention, he relied on the following judicial decisions :(i) Mr. Shobhnath vs. Prism Industrial Complex Limited - C.P. No. 168/ALD/2017 by NCLT, Allahabad Bench (ii) Mr. Shobhnath & Ors. vs. Prism Industrial Complex Limited, NCLAT, New Delhi MANU/NL/0353/2019 : (iii) Praveen Kumar Mundhra vs. CIL Securities Limited - NCLAT 2019 SSC online NCLAT 334. (iv) Leo Duct Engineers and Consultants Limited - NCLT, Mumbai Bench - MANU/NC/0720/2017 : . (v) Unigreen Global Private Limited, NCLT, Principal Bench, New Delhi - MANU/NC/0338/2017 : . 6. He also referred to the relevant paragraphs in detail to support his contentions. He further contented that the name of both Financial Creditor and Corporate Debtor were similar which could be possibl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. 9. We have considered the submissions made by both sides. In this application it has been alleged that the order for CIRP 31.10.2019 in C.P. No. 1278/KB/2019 has been obtained by way of fraud, hence, this order needs to be set aside. This issue has got two dimensions. Firstly, whether the impugned order can be set aside within the scope of section 65 of IBC 2016 or this plea can be considered by this Authority in terms of its inherent power read with rule 11 of NCLT Rules, 2016. Secondly, whether in the facts of case collusive application and / or fraud appear to exist. 10. The question which needs answer is what we understand by inherent power of Court or Tribunal. As per accepted and settled judicial understanding, inherent powers are such powers which are unalienable from Court / Tribunal and may be exercised by Court or Tribunal to do full and complete justice between the parties before it. Such power is derived from the principles of natural justice and equity. As far as Tribunal is concerned, Rule 11 of NCLT Rules, 2016 vests it with the inherent power. The said rule reads as under: "11. Inherent Powers Nothing in these rules shall be deemed to limit or otherwis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of section 14 of IBC, 2016, hence, their application has legs to stand. Considering this judicial principle read with the provisions of rule 11 of NCLT Rules, 2016, we hold that the order for CIRP can be set aside if the facts given in the application support / prove the case of the applicant. 11. As far as scope of provisions of section 65 of IBC 2016 is concerned, we are of the view that such section is limited in its scope as it empowers the Adjudicating Authority to impose penalty if it is found that initiation of insolvency resolution process is due to fraudulent act or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation as the case may be. The preceding stage of the applicability of this provision is a conclusive finding by the Tribunal in the case that there was an act of fraud or malicious intent in initiation of Insolvency Resolution Process or Liquidation proceedings. Further, for taking any action under this section, opportunity of hearing to the party going to be affected is a must. 12. Thus, based on the above discussion it can be concluded that the Tribunal has got inherent powers to recall its earlier order and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporate Debtor has not contested the claim of the Financial Creditor at all and have obtained the advantage of moratorium, this fact cannot be ignored also because it is the real purpose / object. Thus, a grave injury has been caused to the applicants by adopting this mechanism, hence, malicious intent and abuse of process of Tribunal is established. 14. It is also not in dispute that the Financial Creditor has been incorporated in April 2019 with a paid up capital of Rs. 1 lakh only. It has borrowed 57 lakhs in three tranches of Rs. 20 lakhs, Rs. 23 lakhs and Rs. 14 lakhs on 10.05.2019, 13.05.2019 and 15.05.2019 respectively from M/s. Chajjer Credit & Investments Pvt. Ltd. Out of this, Rs. 50 lakhs have been given to the Corporate Debtor in two tranches on 23.05.2019. The main object of the Financial Creditor is to engage in the business of accommodation services (room), hotels, motels etc. which is incidentally the activity of the Corporate Debtor as well. It has been claimed by Financial Creditor that these loans were taken for its business purposes. However, anticipating some delay thereon, these were lent to the Corporate Debtor. We are amused as to how this plea is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, this transaction establishes the connection between the Financial Creditor and the constituents of Corporate Debtor who are the ultimate beneficiary of admission of application filed u/s 7 of IBC, 2016 beyond any doubt. 16. Further, it is not disputed that a sum of Rs. 30 crore has been taken by the constituents of the Corporate Debtor from the applicants against security of the shares of the Corporate Debtor (by own admission of Corporate Debtor during the course of proceedings) and such security has not been effected by way of registration of transfer application lodged by the applicants. Thus, it is a clear cut case of defrauding the applicants by getting moratorium under section 14 of IBC 2016. We also do not find any merit in the contention on behalf of the Financial Creditor that it is a case of collusion between the Corporate Debtor and the applicants because as compared to the claim of the Financial Creditor of Rs. 50 lakhs, the constituents of the Corporate Debtor are getting much more benefit which is many times of the said amount, i.e., Rs. 50 lakhs involved in section 7 application. 17. Thus, considering the facts and circumstances of the case as discussed above ..... X X X X Extracts X X X X X X X X Extracts X X X X
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