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TMI Blog2022 (1) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... indulgence in fraudulent transactions and refer to the matter to IBBI in view of the provisions under section 236 of the Insolvency and Bankruptcy code, 2016. 2. Brief facts of the case are as follows: i. The applicant was appointed as as Interim Resolution Professional on 26.11.2019 in (IB)-2414/ND/2019 dated, and which was communicated to him on 28.11.2019. ii. The Corporate Debtor is in the courier business and was earlier known as Committed Worldwide Express Pvt. Ltd. The corporate debtor changed their name of Stock flow Express Pvt. Ltd. on 26-07-2019. iii. Prior to Dec 2018, there were five directors in the company viz, 1. Mr. Nitin Bharal 2. Mr. Narendra Bisht 3. Mr. Rajeev Sharma 4. Mr. Yashpal Arora 5. Mr. Sujeet Kumar Chaudhary iv. That the persons mentioned at Sl. No. 1 to 4 were also the promoters and collectively 100% share-holders in Stockflow Express Pvt. Ltd. On 27-12-2018, Mr. Shiv Kumar Chaturvedi was appointed as a director in company. On 31.12.2018, persons at s. No. 1 to 4 above resigned as directors. In the month of August 2019, Mr. Sujeet Chaudhary passed away thus leaving only one director Mr. Shiv Kumar Chaturvedi in the company. v. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -operation from the ex-directors/director, the IRP has been able to list only a limited number of transactions under specific sections of the IBC 2016. xi. That after the commencement of the CIRP, the applicant met Mr. Nitin Bharal (ex-director/promoter) to understand about the corporate debtor. Mr. Shiv Chaturvedi, though a director, claims to not have much information of business with him. Sometime later IRP met Mr. Narendra Bisht (ex-director/promoter) to seek help for appointment of second director as certain MCA compliance were pending, which needed to be completed. Mr. Bisht informed that the promoters have sold their shareholding and they are no more the shareholders, but this fact was not disclosed by Mr. Nitin Bharal earlier. Mr. Bisht also informed about Mr. Manish Kumar Gupta, who helped complete the share sale deal but Mr. Manish Gupta, refused to share any information asking to get the information from Mr. Bisht only. The company Secretary Ms. Eva Srivastava too has not been sharing information. xii. That Mr. Nitin Bharal after much follow-up shared two names and addresses to whom he claimed to have sold his shares. On checking at those addresses, the same were fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted concern Committed Cargo Care Ltd. on 20-10-2017. The four promoters are also the promoter/directors of Committed Care Cargo Ltd. xv. That on 31-03-2018, about five months later, Committed Cargo Care Ltd. sold a part of its share-holding in the corporate debtor, Stockflow Express Pvt. Ltd., back to these four promoter directors. That on query, the four promoters/ex directors of the corporate debtor failed to explain the objective of making these round-about share sale transaction between companies where they are common promoters/directors, which shows that the share-sale transactions has been carried on to defraud the creditors. Also, the ex-directors were in a hurry to get rid of their responsibilities (while still keen on enjoying status as signing authority in the banks) as directors and made inefficient arrangements by appointing another director with far lesser capabilities to replace the four ex-directors. Moreover, the ex-directors did not surrender their authorization as signing authority in banking transactions even after selling off their share-holding and kept operating the bank accounts of the corporate debtor as if they were still the directors/authorized signator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Nitin Bharal informed that it is the right of related entity to pursue any business mentioned in the articles of the company. The CoC members informed the IRP that DHL could be one common customer and they could provide information if the related entity has commenced courier business. The IRP had written to the concerned person at DHL, Ms. Simi Chopra. However, Ms. Chopra only replied on a telephonic call that she has sent the enquiry to DHL's legal department. However, she has not replied back since then. xviii. The IRP is of the view that the respondent ex-directors/promoters of the corporate debtor have started this courier business through the related entity Committed Cargo Care Pvt. Ltd. to influence the debtors of the corporate debtor and misuse the amount receivables for the benefit of the related entity. This would severally affect the interests of the creditors of the corporate debtor. The quantum of this impact could not be assessed. However, this action could impact the entire debt receivables of the corporate debtor which stand at Rs. 3,80,22,551.68/- including the debts written off. xix. The IRP has been following up with the debtors of the corporate debtor fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary affidavit to submit supporting documents for banking transactions mentioned on page numbers 52 and 53 of the IA/2153/2020. ii. That on 12-10-2020, the IRP wrote to the three Banks (Yes Bank, ICICI Bank and Axis Bank) with the respective list of specific bank transactions from the list given on page 52 and 53 of the IA/2153/2020. These transactions included cheques as well as online transfer debit transactions. The banks were asked to provide the names of the cheque signatories, authorised signatories during the period these transactions happened. iii. Two of these Banks, Yes Bank and ICICI Bank have replied to the IRP with details. The number of transactions pertaining to these two banks is 78 out of a total of 80 transactions. The Axis Bank had to reply for two number transactions. However, the Axis bank has not replied to the IRPs queries. iv. The Respondents No. 1 to No. 4 in their reply dated 29-09-2020 have mentioned that after their resignation as directors of the Corporate Debtor on 31-12-2018, the entire management and control of the Corporate Debtor was under the control of Mr. Sujeet Kumar Chaudhary (now deceased) and Mr. Shiv Kumar Chaturvedi. The Respondents N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e online transactions authorising persons. xi. The respondents R1 to R4 have denied that they were operating the bank accounts of the Corporate Debtor after resigning as directors on 31-12-2018. The above information received from the Banks supports the IRP's observations in the application IA/2153/2020, that the Respondents 1-4 were indeed operating the bank accounts of the Corporate Debtor. 4. The Respondents No. 1 to 4 in their reply dated 29.09.2020 denied the contentions made in the application and contended that: i. The respondent referred the judgment of the Hon'ble Supreme Court in the matter of "Bishundeo Narain and another us. Seogeni Rai and Jagernath" 1951 SCR 548 : AIR 1951 SC 280. ii. That none of the transactions in question as in the application under reply fall within the category of fraudulent transaction. iii. That the sale of shareholding does not fall within the scope of section 66 of IBC as it does not relate to any business of the corporate debtor which has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose. iv. That the answering respondents are admittedly the ex-directors of the corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents had surrendered their authorization as signing authority in banking transactions even after selling their shareholding and not kept operating the bank accounts of the C.D. x. That the answering respondents are not aware or privity of transaction of Rs. 3 Lac cash payment by Mr. Jasoria, as the same was after taken over of Management from them, accordingly, cannot comment on the same. xi. That there is no evidence to the fact that the Respondents No. 1-4 while being employed as the directors of the Corporate Debtor did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor. 5. The Respondent No. 5 in his reply dated 29.09.2020 denied the contentions made in the application and contended that: i. That the answering respondent joined the company as nominee/employee of Mr. Sujeet Kumar Chaudhary on 27.12.2018 and Mr. Sujeet Kumar Chaudhary was the person in charge of the management and control of the company. Further, the answering respondent is not the shareholder of the company and was only an employee Director of the company. Further, the entire documents and record of the company was also was with Mr. Surjeet Chaudhary and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the contentions made in the application and contended that: i. the answering respondent is proprietorship firm running the courier services at Agra, UP. The answering respondent firm had an oral and mutual understanding with the firm namely "Committed Worldwide Express Pvt. Ltd." wherein the international couriers received by the answering Respondents used to be sent to the "Committed Worldwide Express Pvt. Ltd.," situated at New Delhi and the profit arising out of the same used to be shared by both the companies as per agreed terms and conditions. ii. the answering Respondents were in commercial business transaction with the "Committed Worldwide Express Pvt. Ltd. The answering Respondents and the "Committed Worldwide Express Pvt. Ltd.," from time to time used to issue credit note and debit note to each other and the difference of amount used to be cleared by both the companies by making the payment in account Transfer or in cash. iii. the copies of the aforesaid debit notes have already been sent to the "Committed Worldwide Express Pvt. Ltd.," through emails as mentioned above, however the Directors/Personnel of "Committed Worldwide Express Pvt. Ltd.," intentionally and w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ombined reading of Section 3(33) of IBC and Regulation 4(f) of IBBI Regulations, 2016, the IRP can look into the transactions qua the Corporate debtor alone and not its associated company and much less seek information regarding the same and therefore the IRP's query to the answering Respondent and/or DHL was completely without jurisdiction. x. The application is not maintainable in view of bar of pecuniary jurisdiction of this Hon'ble Tribunal being a sum of Rs. 1 crore. 8. The Respondent No. 10 in his reply dated 10.12.2020 denied the contentions made in the application and contended that: i. the answering Respondent was the Proprietor of the firm namely "R.J. Brothers", however the said firm has been abolished in the year 2017 and a new partnership firm has been constituted in the name and style of "R.J. Logistics Services LLP', wherein the answering Respondent Mr. Rohit Jasoria is a partner. ii. the answering Respondent firms had an oral and mutual understanding with the firm namely "Committed Worldwide Express Pvt. Ltd." wherein the international couriers received by the answering Respondents used to be sent to the "Committed Worldwide Express Pvt. Ltd.," si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd payable by the answering Respondent to M/s. Committed Worldwide Express Pvt. Ltd. And the account details have already been sent to M/s. Committed Worldwide Express Pvt. Ltd. viii. the answering Respondents have never done or entered into any business or commercial transaction with M/s. Stockflow Express Pvt. Ltd., at any point of time, after its constitution and particularly after December, 2019, much prior to the initiation of present proceedings by M/s. Argus Global Logistic Pvt. Ltd. against M/s. Stockflow Express Pvt. ix. the answering respondent also referred to the definition of "transaction" Section 3(33) of IBC and Regulation 4(f) of IBBI Regulations, 2016, which is also discussed earlier. 9. The Applicant in its written submissions dated 24.10.2020 submitted that: i. In respect of Respondents R1-R4 In their replies dated 29-09-2020, the respondents have mentioned that the transactions highlighted by the IRP have not been substantiated to establish fraud and fraudulent transactions. The following written submissions by the IRP are being made in the matter. Sale of Shareholding by the Respondents R1 to R4 - The respondents have been hiding the information from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct contact details of the new shareholders have still not been shared. It is pertinent to mention that the paid-up capital of the Corporate Debtor is Rs. 10,00,000/-. As informed by the respondents, the total shareholding has been sold for Rs. 200000/- at a steep discount. The sale of the share ownership at a substantially low amount of Rs. 200000/-, as informed by the respondents now, only raises further questions on these share sale transactions. The respondents R1-R4 may cite their rights to sell their shareholding as they please, however the context is suspicious. Their resigning en-masse as directors when the company needed them the most, as at that time, one of the directors was terminally ill and another was not capable as director as claimed by himself (Respondent No. 5), shows complete lack of due diligence for the benefit of the corporate debtor on part of Respondents R1 to R4 resulting into insolvency of the corporate debtor and loss to the creditors. Further, the actions of the respondents in hiding information from the IRP and even furnishing wrong details to mislead indicates towards actions to cover-up wrong doings. ii. Bad debt write-offs - The understanding o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vere damage to the recovery prospects of the creditors of the corporate debtor and has been carried out consciously by the respondents to benefit themselves at the expense of the creditors of the corporate debtor. This falls under the provisions of the Section 66(1) of the IBC 2016. iv. Cash Transactions and receiving cash from debtors - The IRP has been informed verbally by Respondent No. 9, who was a debtor to the corporate debtor. When IRP has followed up with the debtors, several them have mentioned verbally that cash payments were done to the respondents. The IRP estimates that due to the above actions of the respondents, the interests of the creditors have been affected severely. v. Respondent No. 5 - The respondent No. 5 mentions that, he was made to join the corporate debtor as nominee employee of the deceased director Mr. Sujeet Kumar Chaudhary and that the deceased director was the person in charge. The Respondent 5 has put all onus on the deceased director, like as done by Respondent No. 1 to Respondent No. 4. However, it may be noted that while Respondent 5 claims all innocence and ignorance, he is finding it suitable to justify the write-off of debts and sale of sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to further reminders. After this application was filed by the IRP before Hon'ble NCLT and a copy was served to Ms. Chopra, she replied. She has replied that DHL 'recovered' entire outstanding from the corporate debtor and that business has been under a new name 'Committed Cargo Care Ltd. with effect from 04-02-2020. She further advised the IRP to speak with Mr. Prashant D. Pai, Manager Sales Channel Business based at Mumbai. When the IRP called Mr. Pai and asked his queries, Mr. Pai informed that DHL had 'forfeited' bank guarantees of the corporate debtor to recover their outstanding. Mr. Pai also informed that there was a request from the respondent number 1 to respondent No. 4 (ex-directors of corporate debtor) to restart business with their other entity. The copies of these communications with Ms. Simi Chopra and Mr. Prashant Pai are attached in their own reply. It is further submitted that the Respondent No. 1 to 4 and Respondent No. 8 have connived to ensure all dues of the Respondent No. 8 were recovered from the corporate debtor since the Respondent 1 to 4 were in control of the business of the corporate debtor even after resigning as directors. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation i.e. 31.12.2018. xi. It is further stated that against large outstanding amounts from the debtors, there are irregular write offs being made on behalf of the corporate debtor. As per the book of the corporate debtor referred to at page No. 54 of the application, the corporate debtor had around Rs. 20,12,383/- (Rupees Twenty Lakh Twelve Thousand Three Hundred and Eighty Three Only) and Rs. 22,20,657/- to be recovered from Y.K. Logistics & Y.K. International respectively. These are proprietary firms of Mr. Rahul Jasoria. It is further submitted that the proprietor had submitted an NOC wherein against a total amount of Rs. 42,33,040/-, the corporate debtor has adjusted for just Rs. 5,00,000/- through an NOC dated 12.04.2019. In an even more strange set of events, the sole remaining director has denied the existence of any such NOC. 10. Respondent No. 8 in its written submissions dated 15.10.2020 has stated almost same statement as stated in its reply save and except as follows: i. The aforesaid averments coupled with the document annexed @ pages 48 of the Application do not reflect the complete picture since DHL, though not legally bound to respond to any query of the IRP w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tfully submitted that the IRP in the entire application has failed to point out that as to how the issuance of NOC dated 12.4.2019 are fraud over the creditors and fraudulent in nature. It is well settled law that one has to establish fraud and referred to judgment of the Hon'ble Supreme Court in "Bishundeo Narain and another vs. Seogeni Rai and Jagernath" 1951 SCR 548 : AIR 1951 SC 280. iv. That vide email dated 6.01.2020, the IRP illegally sought the information regarding Committed Cargo Care Ltd., since no transaction existed between the Respondent No. 9 and the Corporate Debtor. 12. We have heard the Ld. Counsel appearing for the parties and perused the averments made in the application, reply, rejoinder and written submissions filed by the respective parties. 13. Ld. Counsel for the applicant raised all the facts stated in the application and written submissions and further submitted that the respondent Nos. 1 to 4 though tendered their resignation on 31.12.2018 after appointing Mr. Shiv Kumar Chturvedi, the respondent No. 5 as a Director on 28.12.2018 but still they had been operating the bank accounts of the Corporate Debtor. He further submitted that the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an advance or post dated cheques were issued by these respondents, which might have been encashed after their resignation from the Company. 15. The other respondents have filed their reply and also submitted that they are not liable for any fraudulent transaction. 16. Now, before considering their submissions, we would like to refer to Section 66 of the IBC, 2016 and the same is reproduced below:- Section 66: Fraudulent trading or wrongful trading. 66. (1) If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit. (2) On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that a director or partner of the corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 66 of the IBC, 2016. As we referred to the provision of Section 66 IBC and in terms of Section 66, there are two ingredients, which constitute the fraudulent trading or wrongful trading; first one is the business of the Corporate Debtor has been carried on, we intent to de-fraud creditors of the Corporate Debtor or second one for any fraudulent purpose. When we consider the averments and the reply of respondent Nos. 1 to 4 in terms of Section 66, then we find, the respondent Nos. 1 to 4 have not explained any reason to sell their shares to a Company, which is own and managed by them and they have also not explained the reason, why the said Committed Care Kargo Limited again resold the shares to these respondents. In our considered view, if the respondent Nos. 1 to 4 claims that these transactions do not come within the purview of Section 66 of the IBC, 2016 then onus is upon them to establish that said transaction was not with intent to de-fraud the creditors. But the respondent Nos. 1 to 4 have failed to establish this, therefore, we are of the considered view that these shareholding transactions were made with intent to defraud the creditors of the corporate debtor comes und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x-directors/promoters were operating the bank transactions. The last bank transaction appears on 26.07.2019 and the total transaction after 31.12.2018 were of Rs. 19,98,602/- which shows that even after resignation, respondent Nos. 1 to 4 the ex-directors of the Corporate Debtor having the control over the financial operation of the Corporate Debtor. 24. At this juncture, we would like to refer to the arguments advanced on behalf of the respondent Nos. 1 to 4 that they have not operated the bank account after their resignation but further submitted that there is a possibility, if any post dated cheques were issued by them then they might had been encashed. 25. At the cost of repetition, we would like to refer to the contention of the applicant, who in course of argument referred to the copies of Cheques, which were issued between 08-01-2019 and 29-06-2019, much later than the date of 31-12-2018, shared by the concerned Bank, duly signed by R1 -- Mr. Nitin Bharal, R2 -- Mr. Narendra Bisht, R4 -- Mr. Rajeev Sharma. Each of these cheques have been signed by two of the above respondents. All these cheques have been debited from the accounts of the Corporate Debtor. when the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resignation was tendered only with intent to de-fraud with the creditors or for the fraudulent purposes. And that is the reason, the bad debts were written off at the instance of Respondent No. 1 to 4 even after their resignation. 27. Now coming to the third point, the cash transactions receiving cash from debtors admittedly Vyke Logistics and Vyke International, the respondent No. 9 owes the debts and they have debtors of the Corporate Debtor, as per the books of Corporate Debtor, total amount is of Rs. 20,12,383/- and Rs. 22,20,651/- and the claim of these respondents are they have settled the amount on full and final payment after making payment of Rs. 3 lakhs as cash. A total debt of Rs. 42,33,034/- was settled only after making payment of Rs. 3 lakhs that has not been disclosed either by the respondent Nos. 1 to 4 and respondent No. 9. We further notice that there is another Creditor as per the averments made in the application that is respondent No. 10 RJ Logistics Services LLP with Mr. Rohit Jasoria as the designated partner and RJ brother with Mr. Rohit Jasoria owes the debt of Rs. 10,71,250/- and Rs. 13,06,702/- respectively and their debts are also written off. The resp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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