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TMI Blog2021 (6) TMI 192X X X X Extracts X X X X X X X X Extracts X X X X ..... tand suspended and will be exercised by the IRP. From the documents filed by the third respondent/Bank of India, it is seen that the said amount of ₹ 79,65,070 was being distributed to about 69 persons for the period from June 30, 2017 to September 28, 2017 at the behest of the first and second respondent herein by way of various bank instruments, viz., cheques/NEFT/RTGS and cash withdrawals. At this juncture, it is to be borne in mind that the avoidance transactions as contem plated under Chapter III of the IBC, 2016 would come into place only in relation to the transactions which happened prior to the commencement of CIRP. However, section 66 of the IBC, which deals with fraudulent trading and wrongful trading which falls under Chapter VI does not make such a distinction - the first and second respondents have also acted in violation of the moratorium as envisaged under section 14 of the IBC, 2016. The first and second respondent have knowingly transferred the sum of ₹ 79,65,090 to the accounts of the creditors, which would amount to fraudulent trading as envisaged under section 66(1) of the IBC, 2016 aided and abetted by the third respondent which they are requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the corporate debtor on September 20, 2017. 3. Learned counsel for the applicants submitted that the committee of creditors of the corporate debtor in its 6th meeting held on December 8, 2017 had passed a resolution unanimously to liquidate the corporate debtor and that this Tribunal vide order dated January 11, 2018 in I. A. No. 66 of 2017 has ordered for the liquidation of the corporate debtor and appointed the applicant herein as the liquidator. 4. Learned counsel for the applicant submitted that while investigating into the financial affairs of the corporate debtor, the applicant had found serious mismanagement and diversion of funds for the financial years 2015-16 and 2016-17 until the appointment of the applicant. It was submitted that the corporate debtor had maintained a bank account with Bank of India, Tirupur SME Branch bearing account No. 821420110001141 and had carried out transactions violating the moratorium declared by this Tribunal vide order dated June 14, 2017. 5. Learned counsel for the applicant submitted that on June 22, 2017 a demand draft bearing No. 935020 was issued to the corporate debtor towards Income-tax refund for a sum of ₹ 79, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t application is neither maintainable in law nor on facts as the same is ultra vires the liquidator. It was submitted that the present application is filed to falsely implicate these respondents. 8.2. It was submitted that the CIRP in relation to the corporate debtor was initiated on June 14, 2017 and the fourth respondent was appointed as the IRP, who was replaced by the applicant on September 20, 2017 and the liquidation in relation to the corporate debtor was ordered by this Tribunal on January 11, 2018. Thereafter, the liquidation proceedings were stayed by the hon'ble National Company Law Appellate Tribunal on May 16, 2018. Further, it was submitted that no application was ever filed by the fourth respondent-IRP or the applicant as an RP against these respondent for non-co-operation under section 19 of the IBC, 2016 during the CIRP and in fact only applications were pending against the secured financial creditors for non-co-operation with the CIRP. 8.3. It was submitted that the applicant has never questioned the alleged non-co-operation of these respondents during the CIRP, the applicant and the fourth respondent are hence estopped from filing such application at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent permitted the usual banking operations to the said account holder and almost the entire amount of ₹ 79,65,070 was withdrawn from the account by way of clearing instruments, payments by way of RTGS/NEFT at the instructions of the said creditors/account holder. 9.4. It was submitted that only when the applicant herein approached the third respondent on October 13, 2017 and handed over a letter informing the replacement of the fourth respondent with the applicant as the resolution professional and immediately thereafter, the third respondent updated the operational instruction for the account in the system and since then the applicant is operating the said account. 9.5. It was submitted that the third respondent had acted in good faith and was not aware about the moratorium declared by this Tribunal and hence the question of directing this respondent to make such contribution to the assets of the corporate debtor to the tune of ₹ 79,65,070 would not arise. 10. Reply filed by the fourth respondent 10.1. Learned counsel for the fourth respondent/erstwhile IRP submitted that he had performed his duties as an IRP of the corporate debtor for the period from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or under section 10 of the IBC, 2016 seeking thereof to initiate the CIRP against itself the same came to be admitted by this Tribunal on June 14, 2017. As per the provisions of the IBC, 2016 once an application under section 7, 9 or 10 of the IBC, 2016 is admitted by the Adjudicating Authority, the moratorium as envisaged under section 14 of the IBC, 2016 irrespective of who had initiated the process will come into effect. For the sake of convenience section 14 of the IBC, 2016 as it presently stands, is extracted hereunder : 14. Moratorium.-(1) Subject to provisions of sub-sections (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely :- (a) the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, Tribunal, arbitration panel or other authority ; (b) transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein ; (c) any action to foreclose, recover or enforce any sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, as the case may be. (*Provisions inserted only with effect from December 28, 2019 and not prevalent at the time of initiation of CIRP on June 14, 2017 of the corporate debtor). Further, section 17 of the IBC, 2016 sets out about the management and affairs of the corporate debtor by the interim resolution professional, which is extracted hereunder : 17. Management of affairs of corporate debtor by interim resolution professional.-(1) From the date of appointment of the interim resolution professional,- (a) the management of the affairs of the corporate debtor shall vest in the interim resolution professional ; (b) the powers of the board of directors or the partners of the corporate debtor, as the case may be, shall stand suspended and be exercised by the interim resolution professional ; (c) the officers and managers of the corporate debtor shall report to the interim resolution professional and provide access to such documents and records of the corporate debtor as may be required by the inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate debtor has ownership rights as recorded in the balance-sheet of the corporate debtor, or with information utility or the depository of securities or any other registry that records the ownership of assets including- (i) assets over which the corporate debtor has ownership rights which may be located in a foreign country ; (ii) assets that may or may not be in possession of the corporate debtor ; (iii) tangible assets, whether movable or immovable ; (iv) intangible assets including intellectual property ; (v) securities including shares held in any subsidiary of the corporate debtor, financial instruments, insurance policies ; (vi) assets subject to the determination of ownership by a court or authority ; (g) to perform such other duties as may be specified by the Board. Explanation.-For the purposes of this section, the term 'assets' shall not include the following, namely :- (a) assets owned by a third party in possession of the corporate debtor held under trust or under contractual arrangements including bailment ; (b) assets of any Indian or foreign subsidiary of the corporate debtor ; and (c) such other assets as may be notified by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot shy away from his duty/responsibility by stating that the CoC was not co-operating and there seems to be a serious omission on the part of the fourth respondent in this regard in performing his duties. 11.4. Admittedly, the transaction to the tune of ₹ 79,65,070 took place after the moratorium order was passed by this Tribunal on June 14, 2017. In fact the said sum of ₹ 79,65,070 as per the statement given by the third respondent came into the coffers of the corporate debtor only on June 29, 2017, i. e., 14 days after the date of initiation of the moratorium. The first and second respondent at whose behest the application under section 10 of the IBC, 2016 was filed cannot plead ignorance of the fact that they are unaware of the provisions of the IBC, 2016. In fact in their counter they have only questioned about the competency of the applicant to file the pre sent application and hence the maintainability much less they have traversed into the facts of the case. It is an undisputed fact that the impugned transactions have been carried out by the first and second respondent after the order of moratorium have been passed by this Tribunal. 11.5. From the documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assy Property Developments P. Ltd. v. State of Karnataka [2020] 9 Comp Cas-OL 609 (SC) ; [2020] 13 SCC 308 and also by applying the same to the facts of the present case, we are of the view that section 66(1) of the IBC, 2016 can be invoked in the present case, wherein the first and second respondent after knowing that an order of moratorium has been imposed against the corporate debtor that too at its own instance and that their powers stood suspended thereafter, have deliberately transferred the said sum of ₹ 79,65,070 to various stakeholders in numerous tranches and thereby defrauding and depriving the other creditors in relation to the corporate debtor of the said amount. Thus, the first and second respondents have also acted in violation of the moratorium as envisaged under section 14 of the IBC, 2016. 11.7. The third respondent also cannot get itself absolved on the pretext that it was not aware of the initiation of the CIRP in relation to the corporate debtor as upon the admission of the petition by this Tribunal, the said date in terms of section 5(12) of the IBC, 2016 is considered to be the commencement date of the CIRP as held by the hon'ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up of the corporate debtor. The role of the insolvency professional is neatly carved out. From the date of admission of application and the appointment of interim resolution professional, the management of the affairs of the corporate debtor is to vest in the interim resolution professional. With such appointment, the powers of the board of directors or the partners of the corporate debtor as the case may be are to stand suspended. Section 17 further declares that the powers of the board of directors or partners are to be exercised by the interim resolution professional. The financial institutions are to act on the instructions of the interim resolution professional. Section 14 is emphatic, subject to the provisions of sub-sections (2) and (3). The impact of the moratorium includes prohibition of transferring, encumbering, alienating or disposing of by the corporate debtor of any of its assets. 13. Further, reading in tandem paragraphs 24 and 25 of the above judgment rendered in Sandeep Khaitan, Resolution Professional for National Plywood Industries Ltd. v. JSVM Plywood Industries Ltd. [2021] 226 Comp Cas 332 (SC), the hon'ble Supreme Court had itself clarified that the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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