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TMI Blog2022 (6) TMI 986X X X X Extracts X X X X X X X X Extracts X X X X ..... speaks of Prarthna. This objection is unwarranted. It is not held that the Income tax Assessment Order is binding on this Tribunal. In view of the entire gamut of facts, the interrelationship between the Financial Creditors (and Nikita and Active which merged into Narsingh), the forensic Audit Report and the analysis of the facts that we have done above, leave us unpersuaded to commence CIRP against the Corporate Debtor. We cannot therefore in exercise of our summary jurisdiction under the Code, conclude that a bona fide Financial Debt exists. For this reason, this petition under Section 7(1) of the Code is not maintainable and hence we reject the Petition - petition dismissed. - C. P. (IB) No. 964/KB/2020 - - - Dated:- 13-6-2022 - Mr. Rohit Kapoor, Member (Judicial) And Mr. Harish Chander Suri, Member (Technical) For F.C : Mr. Anirudh Wadhwa, Adv. Mr. Rohit Sharma, PCS Mr. Keshav Gulati, Adv. For C.D : Mr. Ratnanko Banerji, Sr. Adv. Mr. Soumabho Ghose, Adv. Mr. Soumalya Ganguli, Adv. Ms. Tiana Bhattacharya, Adv. Ms. Sudarshana Dutta, Adv. ORDER Per: Harish Chander Suri, Member (Technical) 1. The Court is convened by video conference today. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reconstruction Company Limited had taken over the management of the Corporate Debtor pursuant to which the previous Board of Directors had resigned from the board. Secondly, it was stated that the Corporate Debtor was of the belief that the said transactions were made with an intention of siphoning the funds and that the company was conducting a detailed forensic audit and other due diligences to find the rationality of the transaction after which it may further take relevant legal actions 6. It is further submitted that the Corporate Debtor had deducted TDS of Rs. 96,061/- on interest of Rs. 11,35,615/- in the financial year 2014-2015 and 2015-2016, which was paid to the account of Prarthana and a sum of Rs. 2,12,209 being TDS on interest of Rs. 25,09,588 to the account of Narsingh. 7. It is submitted that the Financial Creditors have filed Statements titled as Date of Default along with amount of debts granted by the Financial Creditors along with their respective Dates of Disbursement and workings for computation of amount and days of default in tabular form Annexures 'C' 'D'. As per these tabular statements for both Prarthana and Narsingh, the date of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed against the Corporate Debtor as the assessee. The assessment order relates to the assessment year 2015-16. It provides that during the period under assessment, the Corporate Debtor had, inter alia, received an unsecured loan of Rs. 2,70,00,000/- from Prarthana (the first Financial Creditor herein). The assessment order further provides that the directors of Prarthana during the year under consideration were Mr. Annand Prasad Kejriwal and Ms. Jyoti Kejriwal. Mr. Annand Prasad Kejriwal was also a director during the relevant period in Narsingh (the second Financial Creditor herein), Active and Nikita, both of which companies have subsequently merged with Narsingh. Ms. Jyoti Kejriwal was also a director in the aforesaid four companies. By placing reliance on various paragraphs of this assessment order, the Corporate Debtor has alleged that the so-called loans are not genuine as unsecured loans but sham transactions camouflaged as unsecured loans. The Corporate Debtor has placed reliance on various paragraphs of this assessment order which we have taken note of, as part of our analysis and reasoning. 11. It is seen from the record that the Corporate Debtor relies on the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n them and since the order has only made reference to the loan transaction between the Corporate Debtor and Prarthana with nothing being stated in regard to the loan transaction between Corporate Debtor and Narsingh, a default of Rs. 1,55,00,000/- can still be made out against the Corporate Debtor, which is in itself sufficient to trigger CIRP proceedings against the Corporate Debtor. 15. It is pertinent to mention that Active Commercial Pvt. Ltd., Nikita Vyapar Pvt. Ltd. and two other companies were merged with Narsingh Pvt. Ltd. pursuant to a scheme of amalgamation approved by the Hon'ble High Court of Calcutta on 5th January, 2016 in petition No. 155/2015. It is submitted that in accordance with the said scheme and orders passed by the Hon'ble High Court of Calcutta on 5th January, 2016, all rights, liabilities etc. of the merged companies were transferred to Narsingh including those arising from the above mentioned loan agreements dated 13th October, 2014 and 15th December, 2014. It is submitted that accordingly the Financial Creditors have filed the application under section 7 of the Code. 16. It is submitted by the Financial Creditors that for admitting an appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Active and Narsingh. On the other hand, the Corporate Debtor, in support of its contention that the debt in question is a sham, collusive and non-enforceable, has placed reliance on Income Tax Assessment order dated 31.12.2018 and Forensic Audit Report dated 14.01.2021. At the outset, we may deal with the preliminary objection raised by the Corporate Debtor that the instant petition jointly filed by the two Financial Creditors cannot be entertained. This contention is unmerited in view of the fact that Section 7(1) provides that a financial creditor either by itself or jointly with other Financial Creditors ... may file an application for initiating CIRP against a Corporate Debtor... . As such, there is no infirmity in the present joint petition filed by the two Financial Creditors. Whether or not a financial debt exists, it is a question touching upon the merits of the competing claims of the parties and is being decided separately. We accordingly reject this arguments of the Corporate Debtor and are proceeding to decide the matter on the merits. 22. Before proceeding further, it is relevant to take notice of the decision of Hon'ble Supreme Court dated 01.02.2021 in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eate an illusion that money has been disbursed to a borrower with the object of receiving consideration in the form of time value of money, when in fact the parties have entered into the transaction with a different or an ulterior motive. In other words, the real agreement between the parties is something other than advancing a financial debt........ 48. The IBC has made provisions for identifying, annulling or disregarding avoidable transactions which distressed companies may have undertaken to hamper recovery of creditors in the event of the initiation of CIRP. Such avoidable transactions include: (i) preferential transactions under Section 43 of the IBC; (ii) undervalued transactions under Section 45(2) of the IBC; (iii) transactions defrauding creditors under Section 49 of the IBC; and (iv) extortionate transactions under Section 50 of the IBC. The IBC recognizes that for the success of an insolvency regime, the real nature of the transactions has to be unearthed in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. 52. Since the commercial arrangements between Spade and AAA, and the Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, there is a reverse entry of 75,00,000 from the Corporate Debtor to the Financial Creditor. v. The amount claimed to be in default and the date on which the default occurred the principal amount is stated to be Rs. 70,00,000/- (by addition of 50,00,000 and 20,00,000 respectively) and the date of disbursement is 03.11.2014 and 18.12.2014. This table makes no reference to the other amounts disbursed to Prarthana and receipts by Prarthana, as is borne out from Prarthna's bank statements. Loan given by Active to the Corporate Debtor (i) In the application u/s. 7 filed by the Financial Creditors, under the caption facts of the case no particulars of the loan provided by Active have been given. It appears that the details of Active and Nikita have been subsumed within the debt of Narsingh. (ii) In part IV of the application where particular of the financial debt has to be provided, it is stated that amount of debt granted by the Financial Creditor is 4,25,00,000 out of which an amount of Rs. 2,50,00,000 has been received from the Corporate Debtor and the balance amount of Rs. 2,10,00,00 is due and payable by the Corporate Debtor. These figures of 4,25,00, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provides that the same shall be repaid on demand of Nikita. The Interest Rate is 10% per annum payable quarterly. The Loan Agreement except the specific particulars, in material terms, is identical with the loan agreement of Prarthana and Active. (iv) Bank statement of Nikita have not been placed on record. (v) In Annexure C, which is titled as amount claimed to be in default and the date on which the default occurred , the name of Nikita is not specifically mentioned. It appears that while the loan agreement was with Nikita, the amount of Rs. 1,05,00,000/- was not disbursed by Nikita but by Narsingh. Loan given by Narsingh to the Corporate Debtor (i) In the application u/s. 7 filed by the Financial Creditors, under the facts of the case it has been alleged that a loan to the tune of Rs. 1,05,00,000 was provided to the Corporate Debtor by Narsingh. (ii) In part IV of the application where particular of the financial debt have to be provided, it is stated that amount of debt granted by the Financial Creditors is 4,25,00,000 out of which an amount of Rs. 2,50,00,000 has been received from the Corporate Debtor and the balance amount of Rs. 2,10,00,00 is du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... panies revealed that every single credit to the account was correspondingly followed by a debit either on the same day or near about dates. This pattern is repeated in the entire period. Hence, the real and actual source of all such credits is not readily ascertainable in view of layering of money. In the present case of the assessee, same modus operandi was followed. (emphasis supplied) 27. The Income Tax department further found that Prarthana was a paper/shell company of one Mr. Sandeep Surekha who is referred to as an entry operator/accommodation entry provider. The subsequent relevant observations from the Income Tax order are as below:- 6.3.d. During the course of this proceeding notice u/s. 133(6) of the Act was issued to Divya J Electronics Pvt. Ltd., M/s. NGPS Solution Pvt. Ltd., M/s. Prarthana Sales Pvt. Ltd. M/s. Ranbhumi Marketing Pvt. Ltd. production of evidences related to transaction in form of unsecured loan. But no plausible explanation has been received from the parties. The assessee was, thereafter, asked to substantiate its claim of unsecured loan by producing the said party along with supporting documents and evidences but no compliance was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k accounts and book of accounts of the three lender companies which are basically shell/paper/khokha companies. There has been a mushrooming growth of professional entry operators in the country but more particularly in Kolkata, who provide such unsecured loan for a commission. Assessee's non-cooperation and evasive tactics proves its conduct. (emphasis supplied 28. Ultimately, the Income Tax department held that the Corporate Debtor (assessee) had failed to establish the genuineness of the transactions and in exercise of its power u/s. 68 of the Income Tax Act, added Rs. 3,30,00,000 as income of the assessee. 29. We may note here that the finding in the assessment order that .... every single credit to the account was correspondingly followed by a matching debit either on the same day or nearby dates............. applies to the present facts since at least on two occasions amounts that were credited to the account of the Corporate Debtor were paid back on the very next day. For instance, Rs. 1,25,00,000 remitted by Prarthana (in two instalments of Rs. 60,00,000 and Rs. 65,00,000) to Corporate Debtor were credited back into the account of Prarthna by the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations, business and other relevant credentials despite adverse observations made against Prarthana in the Income tax assessment order to the effect that it is a shell/paper company involved in giving of collusive loans as accommodation entries. (v) All four companies involved namely Prarthana, Active, Nikita and Narsingh had common directors at the relevant point of time. The registered office of both financial creditors is also the same. (vi) No explanation has come forward from the Financial Creditors about the disbursements made by Prarthana on 16.04.2014 and 17.10.2014 which were immediately paid back by Corporate Debtor in a day or two. This factum of receipt and immediate payback has been taken notice by income tax department as commonly known modus operandi of converting the unaccounted funds by different companies by taking unsecured loan from willing dubious entities . (vii) Another unexplained fact is that even though as per the Financial Creditors' own case, the Corporate Debtor had stopped paying interest from 2015-16 and 2016-17, there is not a single correspondence on record from Financial Creditors alleging default, seeking repayment of their mon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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