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TMI Blog2020 (2) TMI 1572X X X X Extracts X X X X X X X X Extracts X X X X ..... o agreements signed by them on behalf of themselves or on behalf of Companies or Partnerships, as the case may be. A case falls within the ambit of Sec. 43 of the Code when repayment was made to the Creditor within the look back period for putting such creditor in a beneficial position than it would have been in the event of distribution of assets made in accordance with Section 53 of the Code - RP says that R1 has not provided any consultancy services to the Corporate Debtor, it was only payments made to R1 to cause unlawful gain to R1 based on sham transactions causing loss to other Creditors. When material is absent to prove that the transaction is genuine, the Respondents shall prove that transaction is not fictitious and they must prove that R1 is entitled for commission and that entitlement was cleared by the Corporate Debtor. In this case, no material is there to prove that R1 acted as commission agent to facilitate the Corporate Debtor to secure loan from SREI and also to secure Purchase Order from Regen. As long as this aspect is not proved, it cannot be said that, the relation in between the Corporate Debtor and R1 is debtor and creditor relationship. If any money h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Insolvency Bankruptcy Code, 2016 ( the Code ) against the Respondents namely, Ingenium Advisory LLP (R1), Mr. Deepak Parasuraman (R2), Designated Partner of Ingenium Advisory (LLP) and Mr. P.R. Venkatesh (R3), Promoter-Managing Director of the Corporate Debtor stating that this Resolution Professional, on review of the financial books of the Corporate Debtor, noticed that a sum of ₹ 65 lacs is showing as transferred to R1 from the Corporate Debtor Account on three dates i.e. ₹ 25 lac on 19.12.2016, ₹ 30 lacs on 26.06.2017 and ₹ 10 lac on 31.03.2018. Over and above the amount mentioned above, another amount of ₹ 25 lac is shown as transferred to R1 on 15.12.2016, but whereas this entry of ₹ 25 lac is reflected in tally as reversed but not evidenced in the Bank Statements of the Corporate Debtor. The Applicant further submits that out of aforementioned ₹ 65 lac shown as paid to R1, ₹ 40 lac was shown as transferred on 26.6.2017 31.3.2018, which is within two years before commencement date of CIRP i.e. 02.05.2019. When the Applicant has not found any supportings to these transfers, on R3 being asked about these transfers, R3 has verb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not genuine. No supporting, no invoices from R1 claiming payment, and no TDS has been shown as deducted while the Corporate Debtor paid this amount to R1. 4. The money transfer from the Corporate Debtor to R1 is said to have occurred toward commission payable to R1, according to the Respondents, on two counts, one - commission based on business services provided by R1, two - commission towards arrangement of loan of ₹ 20 Crore to the Corporate Debtor through R1. 5. When income from business operations of R1 is looked into, the RP says, R1's financial statement discloses nil income from the operations of R1, except income of ₹ 37.85 lac from other income. The Applicant considering the transactions in between the Corporate Debtor and R1 as fraudulent transactions, she has moved this application for a direction against Respondents jointly and severally to repay ₹ 65 lac to the Debtor Company as this money has evidently gone from the Corporate Debtor to R1. 6. As against these allegations, R1 R2 and R3 separately filed their replies that R1 was incorporated on 12.01.2015 with designated partners of Mr. Deepak Parasuraman (R2) and Mrs. Chitra Athwani. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents of ₹ 24 lac on 26.06.2017 and remaining ₹ 10 lac on 31.03.2018. According to these Respondents R1 is still entitled to get balance of ₹ 1,25,000 from the Corporate Debtor. 7. As to the allegation of commonality of interest between the directors of the Corporate Debtor and the partners of R1, Respondents submit, merely by having a common office or having office at the premises of Corporate Debtor or erstwhile Managing Director of the Corporate Debtor, commonality of interest cannot be attributed in between R2 and R3, unless the attributed relation falls within the ambit of Section 5(24) or (24A) of the Code. The Respondents submit that there were four Directors in the Corporate Debtor Board, R2 is not related to any of these Directors, therefore, it is not right to say that R3 has acted on the instructions of R2. They say it is true that R2 and R3 are Directors of Udveka but the Director of the Corporate Debtor and the partner of R1 remaining directors in some other company will not fall u/s. 5(24A) (h) of the Code because R3 has never acted as per the directions of R2. For they are not being related to each other, the allegation that R3 acted as per the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to SREI stating as follows: SEFL:OFFER/Loan-Domestic/2016-2017/- Dated 19.06.2017 M/s. Perfect International Fabricators Private Ltd. Mr. Palayam, Sanamagalam Post, Trichy-621104. Kind Attn : Mr. Rajasekaran Venkatesh (Managing Director) Dear Sir/Madam, Sub : Your proposal for the loan transaction with us. With reference to your application we (hereinafter referred to as Srei ) are pleased to offer you ( Borrower ) under both transaction the equipment(s) described below to be used by you on the following broad terms and conditions: ........ Perfect International Fabricators (P) Ltd. P.R. Venkatesh Managing Director 10. On the bottom of every page of this letter, surprisingly it is shown as signed by R3 on behalf of the Corporate Debtor. But in the body portion, it has been stated that an application was given by the Corporate Debtor over which SREI was pleased to offer a loan of ₹ 3.60 Crore. Had it been so, it should have been signed by SREI. But in this case, it was shown as signed by R3 on behalf of the Corporate Debtor. To our understanding it is nowhere shown as this offer letter was processed upon the facilitation provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than it would have been in the event of distribution of assets made in accordance with Section 53 of the Code. 15. In this case, RP says that R1 has not provided any consultancy services to the Corporate Debtor, it was only payments made to R1 to cause unlawful gain to R1 based on sham transactions causing loss to other Creditors. When material is absent to prove that the transaction is genuine, the Respondents shall prove that transaction is not fictitious and they must prove that R1 is entitled for commission and that entitlement was cleared by the Corporate Debtor. Suppose it is proved, then the point is whether it is within the look back period or not, if it is proved that transaction is within look back period and it has not taken place in ordinary course of business, then it is obvious that it will come within the purview of Section 43 of the Code. Then next point is to ascertain as to whether it is within one year look back period or beyond one year look back period and falling in the second year look back period, if it is falling within second year look back period, then it shall fall within Section 5(24) or (24A) of the Code. 16. In this case, no material is there to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y other material such as tax payments, tax deductions and transit receipts and correspondence from third parties to R1 and third parties reflecting R1 persuading them to secure services from the Corporate Debtor, here no such documents are in existence. 20. As to the liability against R3, since he is admittedly erstwhile Managing Director of the Corporate Director and not in a position to prove that it is a genuine transaction and not an action to defraud the Creditors of the Corporate Debtor, he is anyway liable. 21. As to the party not in the management of the Corporate Debtor, that is R2, though he is not part of the management of the Corporate Debtor, he knows that R1 has no claim against the Corporate Debtor, therefore he ought to have refunded it to the Corporate Debtor as soon as it came to the account of R1. Had it been genuine transaction, it must have reflected tax payments and tax deductions and R1 must have disclosed that it has been providing similar services to others, but no such material placed. In view of it, we hereby hold that R2 and R3 are the persons, who were knowingly parties to the carrying on of these fraudulent transactions so as to siphon the funds ..... X X X X Extracts X X X X X X X X Extracts X X X X
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