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TMI Blog2022 (2) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation away from the Appellant and wanted Liquidation order to be passed without even bringing into the notice of the CoC or the Adjudicating Authority about the claim of the Appellant. We are thus, satisfied that material irregularity was committed in the entire process leading to Liquidation, which is sufficient to set aside the Liquidation order. It is not necessary to record any finding with respect to allegations, which are covered by Sections 65 and 69 of the Code and it is for the Adjudicating Authority to consider such issues and take an appropriate decision and if necessary, take follow-up action. Sufficient grounds have been made in this Appeal as specified by Section 61, sub-section (4) for allowing this Appeal - Appeal allowed - decided in favor of appellant. - Company Appeal (AT) (Insolvency) No. 940 of 2020 - - - Dated:- 31-1-2022 - [Justice Ashok Bhushan] Chairperson And [Dr. Alok Srivastava] Member (Technical) For the Appellant : Mr. Jitender Chaudhary, Mr. Vaibhav Kamble, Advocates For the Respondent : CS Omkar Deosthale, for R-2. Mr. Harshavardhan Bhende, for R-3 R-4 JUDGMENT ASHOK BHUSHAN, J. This Appeal has been filed against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xt meeting of CoC. In pursuance of Resolution of CoC dated 22nd October, 2019, an Application was filed by RP under Section 33, sub-section (2) of the Code for passing an order of Liquidation. (vi) The Appellant Drive India Enterprises Solutions Limited came to know about the initiation of CIRP on 16th November, 2019, on which date it sent an email to IRP that they are Operational Creditor of Corporate Debtor, who owes ₹ 22-25 crores. They sought 15 days time to submit their claim. By an email dated 22nd November, 2019, the Appellant submitted its claim in Form-B claiming dues of ₹ 214,174,456/- as receivable from M/s Starconn Mobility Pvt. Ltd. on the basis of the invoices filed along with the claim. On the same day, the Appellant wrote an email to IRP praying that they need last three years audited financial statements/ purchase register/ sales register/ GST return/ bank book of StarConn Mobility Pvt. Ltd. On 30th November, 2019, IRP wrote an email, asking the Appellant to share Ledger statement of Starconn Mobility and calculation of interest was also asked for. On 4th December, 2019, an email was received from IRP to the Appellant again requesting for the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part of CoC meeting and date and time of CoC meeting by communicated. (xiv) On 25th January, 2020, RP sent an email to the Appellant, sending the list of creditors as on 21st December, 2019 and certain documents were also sent. For the first time RP informed the Appellant that Application under Section 33 of the Code has been filed and orders for the same are awaited. (xv) On 5th February, 2020, a personal meeting was held at the place of RP in which Appellant s three officials had appeared. In the meeting, the Appellant has also raised their suspicious about the way IBC filed by Valay Group and entire process being held by Prachay Advisors. The Appellant also emphasized the forensic audit of books of accounts of the Corporate Debtor. An email dated 8th February, 2020 was sent by the Appellant mentioning the details of the meeting held on 5th February, 2020. On 12th February, 2020, the Appellant again requested regarding their claim. The Resolution Professional on 12th February, 2020 admitted the claim of Appellant in totto. (xvi) On 17th February, 2020, the Resolution Professional sent an email to the Appellant informing that claim of the Appellant has been verified and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the Appellant to somehow get the Liquidation order passed without consideration of claim of the Appellant. The RP in CoC Meeting dated 28th December, 2019 did not bring to the notice of the CoC that claim of the Appellant has already been received on 22nd November, 2019. The List of Creditors, Version 2.0 was prepared by RP on 21st December, 2019, but the name of the Appellant was not included. 5. Learned Counsel for the Appellant further submits that the Corporate Debtor had taken a loan and had availed a combined credit limit from State Bank of India and after filing of the Application under Section 9, they repaid the entire loan amounting to ₹ 14.14 crores to the State Bank of India on 27th August, 2019, on which debt, the State Bank of India has also issued a No Objection Certificate. By payment of dues, the properties charged with the State Bank of India were discharged. It is submitted that Application under Section 9 by Financial Creditor was managed by Corporate Debtor themselves and despite there being an Agenda in the meting dated 22nd October, 2019 for transactional/ forensic audit, no audit was directed. In the Meeting dated 22nd October, 2019, the CoC blin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Debtor were not cooperating and Respondent Nos.3 and 4 and had not provided the books of accounts and any information prior to Liquidation order. 7. The learned Counsel appearing for Respondent Nos.3 and 4 denied the allegations of collusion of Respondent Nos.3 and 4 with Respondent No.2. He further submits that SBI loan was not willingly paid, but was recovered by SBI. The Respondent No.3 and 4 in their reply has stated that they have no objection, if the Liquidation process is stayed or reversed by this Tribunal. 8. Respondent No.5 did not appear at the time of hearing, however, had filed its reply stating that they had entered into an Inter-Cooperate Deposit Agreement with Corporate Debtor on 4th October, 2018 and has advanced an amount of ₹ 50 lakhs. Respondent No.5 came to know about the paper publication on 30th September, 2019 that Corporate Insolvency Resolution Process has started against the Corporate Debtor. They filed their claim on 9th October, 2019 to IRP. 9. We have considered the submission of learned Counsel for the parties and perused the record. 10. The challenge in this Appeal is to an order passed under Section 33 directing for Liquidation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng regard to the complexity and scale of operations of the business of the corporate debtor and such other conditions as may be specified by the Board, to submit a resolution plan or plans. (i) present all resolution plans at the meetings of the committee of creditors; (j) file application for avoidance of transactions in accordance with Chapter III, if any; and (k) such other actions as may be specified by the Board. 13. We may notice provisions of the Insolvency and Bankruptcy Board of India (Insolvency Professional) Regulations, 2016 also. Regulation 7, sub-regulation (2), sub-clause (h) provides that Resolution Professional shall abide by the Code of Conduct specified in the First Schedule of the Regulations. First Schedule contains Code of Conduct for Insolvency Professionals . It is useful to notice Item No.1, 12 and 14 only for the purpose of this case: 1. An insolvency professional must maintain integrity by being honest, straightforward, and forthright in all professional relationships. 12. An insolvency professional must not conceal any material information or knowingly make a misleading statement to the Board, the Adjudicating Authority or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) the latest annual financial statements; 16. We may now examine the events and action of IRP/ RP after the initiation of CIRP. The CIRP was initiated on 17th September, 2019. Public announcement was made on 28th September, 2019. The Appellant could not come to know about the publication and after they came to know only on 16th November, 2019, they wrote the IRP seeking fifteen days time to file their claim. On 22nd November, 2019, the Appellant filed their claim in Form-B for an amount of ₹ 214,174,456/-. The IRP asked for several documents for verification of the claim, which all were submitted by the Appellant on 30th November, 2019 and 4th December, 2019. On 5th December, 2019, the RP took over charge from IRP and received all documents including the claim of the Appellant, which fact is admitted in its reply filed in this Appeal. The RP received the claim of Valay Group on 17th December, 2019 and he admitted the said claim within three day and prepared the List of Creditors of 21st December, 2019 including Valay Group in the List of Creditors. The RP after taking charge on 5th December, 2019, in pursuance of Resolution dated 22nd October, 2019 of the CoC ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant was received on 22nd November, 2019, was also material information, which ought to have been placed before the Adjudicating Authority, who was going to consider the Application for Liquidation. No information of receipt of the claim of the Appellant has been submitted by RP to the Adjudicating Authority. 19. Under Regulation 36 of Resolution Process for Corporate Persons Regulation, the Resolution Professional has to prepare an Information Memorandum , which has to be submitted to each Member of the Committee within two weeks of his appointment. Regulation 36, sub-clause (2)(d) is as follows: (2) The information memorandum shall contain the following details of the corporate debtor- (d) a list of creditors containing the names of creditors, the amounts claimed by them, the amount of their claims admitted and the security interest, if any, in respect of such claims; 20. Even if, the RP has not admitted the claim of the Appellant till the preparation of Information Memorandum, the details of the claim of the Appellant were required to be included in the Information Memorandum. Even if, the claim has not been formally admitted, the name of creditors and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All employees of the company have left. Due to non-payment of rental payment, entire assets of the company has been removed by landlord. With above mentioned facts and background that the Corporate Debtor is not a going concern, the historical financials should only be used for historical references and does not provide current financial position of the Corporate Debtor. Below are balance of Corporate Debtor for bank accounts, as on date Bank Account Number Balance (Rs.) YES Bank 055181300001080 896 SBI Current Account 34987491312 5,846 SBI CC 35151915664 -- DBS 830210080112 35,666 Total 42,408 23. There was also Agenda for appointment of Transactional auditor, that is, Agenda Item No.8, which was discussed in following words: Agenda Item No.8. To discuss on transaction audit of the Company and appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Starconn management from time to time and stressed our concern that why such entries as documented in the balance confirmation are not recorded in the books of accounts of Starconn. Considering overall IBC matter being processed/ dealt with, we apprehend that Starconn is being deliberately liquidated under the shadow of IBC to safeguard the interest of the promoters. Therefore we are emphasizing for forensic audit of books of accounts of Starconn. You have mentioned that under the provision of IBC only members of CoC are eligible to request Forensic Audit and any other documents related to Corporate Debtor. However, we hereby request you to represent our matter before CoC and In light of the discussion, documents and all the above transactions you may recommend forensic audit of Starconn to CoC. 25. Thus, present was a case where RP was informed by the Appellant that entire IBC process is being solely carried on by Respondent No.5, which is suspicious. It is further relevant to notice that RP on 17th February, 2020 wrote to the Appellant informing that pursuant to admission of claim of Appellant on 12th February, 2020 and that the List of Creditors Version 3.0 will b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the aid of Respondent No.5 and Respondent No.2. He has also submitted that filing of the Application by Financial Creditor - Valay Group was also malicious. Learned Counsel for the Appellant has also referred to various transactions conducted by the Corporate Debtor to defraud the creditors. These are issues, which can be enquired by NCLT under Section 65 and 69 of the Code. 29. We may refer to a judgment of the Hon ble Supreme Court in (2020) 13 SCC 308 in Embassy Property Developments Private Limited vs. State of Karnataka and Others, where Hon ble Supreme Court after referring to Section 65 made the following observation: 50. The objection of the appellants in this regard is well founded. Section 65 specifically deals with fraudulent or malicious initiation of proceedings. It reads as follows: 65. Fraudulent or malicious initiation of proceedings.-(1) If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency or liquidation, as the case may be, the adjudicating authority may impose upon such person a penalty which shall not be less than ..... X X X X Extracts X X X X X X X X Extracts X X X X
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