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TMI Blog2022 (11) TMI 164X X X X Extracts X X X X X X X X Extracts X X X X ..... lution Professional, directing the Respondents (including the present Appellant) to contribute jointly and severally to the assets of the Corporate Debtor which was under Corporate Insolvency Resolution Process ('CIRP' in short) besides directing criminal prosecution of the Respondents (including the present Appellant) under Section 69 of IBC. Aggrieved by this impugned order, the present appeal has been preferred by Respondent No. 21, who is the present Appellant. 2. The brief facts of the case which are necessary to be noted for deciding the appeal are as follows: HBN Foods Ltd, the Corporate Debtor was originally incorporated as a private limited company on 01.03.2013 and later converted into a public limited company in July 2013. The main objective of the Corporate Debtor was manufacture of food products and beverages but deviating there-from, it launched a collective investment scheme in August 2013 collecting money from public sans SEBI registration. The Investment scheme was stopped abruptly without repayment of the deposit collected from public leading to an application being filed before Adjudicating Authority for initiation of CIRP of the Corporate Debtor by Shri Ash ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unidentified parties and Rs.1.25 crores worth transaction made with the Appellant being the only identifiable independent party. It was further asserted that the TAR while holding that these transactions between the Corporate Debtor and other parties including the Appellant during FY 2013-14 to 2018-19 were sham and fraudulent also observed that the veracity of the transfer transactions with related parties cannot be ascertained as they were not supported by documents. Similarly, the withdrawals made by erstwhile/suspended Board of Directors were also not ascertainable in the absence of any documents/information. It is also submitted that the TAR noted that the nature and purpose of transaction amounting Rs.1.25 crores with present Appellant could not be identified/ascertained in the absence of documents. 4. Contesting the findings of the IRP and the TAR in respect of transactions entered into between the Corporate Debtor and the Appellant, it was contended by the Learned counsel that the Appellant, Birla Financial Distribution Ltd ('BFDL' in short) had sent two letters dated 27.06.2015 and 24.08.2015 to HBN Dairies and Allied Ltd. ('HBND' in short) which were contractual agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t these transactions were sham and fraudulent in nature with the intent of siphoning off the money of the Corporate Debtor to defraud the creditors. 7. The Learned counsel of the Respondent also added that the Adjudicating Authority had justifiably closed the right to file reply by the Appellant after noticing that even after the matter was listed on multiple dates and several adjournments given, no reply had still been filed by them. It was also argued that it is settled law that failure to make specific denial of averments made and documents produced against any party amounts to admission. Rebutting the defence of Covid raised by the Appellant in this regard, it was submitted that Covid could have at best affected the Director only for a month, but in this case, the absence has been for far too long and that this was a case of deliberate evasion since the Appellant had no valid grounds to counter the Avoidance Transaction application. 8. We have duly considered the detailed arguments and submissions advanced by the Learned Counsel for both the parties and perused the records. 9. It is seen at pages 60-71 of the Appeal Paper Book that in the TAR, the Transaction Auditor has put ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese transactions requires further investigation has also been acknowledged in no uncertain terms by the Adjudicating Authority at paras 22-28 of the impugned order, the relevant excerpts of which is as reproduced below: ***** ***** ***** "22. On perusal of the Audit Report, we observe that so far the preferential transactions under section 43, avoidance of undervalued transaction under section 45 and section 50 are concerned, in the absence of the relevant documents and information, the Auditor has shows their inability to comment on these transactions, but so far the transactions under section 66 i.e. fraudulent transactions are concerned, the Auditor at the internal page 21 and page 53 of the Auditor's Report has given a finding "in our opinion falsification/diversion of the money collected from the public at large. However, in the absence of any specific information documents for agreement for discussion with the corporate debtor we cannot give a conclusive opinion that it as is a matter of further investigation is subject to availability of the information. ***** ***** ***** 23. When we consider the findings of the Auditor, in the light of the conduct of the respondents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s aspect was also emphatically asserted by the Learned counsel for the Appellant while making his pleadings. We find that the Adjudicating Authority has also taken due cognisance of the observations made in the TAR that in respect of the alleged fraudulent transactions under Section 66 of IBC, no conclusive opinion could be given by them and that the matter required further investigation. There is clear convergence of opinion between the Transaction Auditor and the Adjudicating Authority that further investigation was warranted in the matter. Viewed against this backdrop, we also note that the Adjudicating Authority had indeed given several opportunities to the Appellant to deny/contravene the findings of the TAR. Be that as it may, we may not lose sight of the fact that the Appellant has explained his inability to send a response as he was Covid stricken for nearly a month and that post-Covid complications had prolonged the recuperation period. The Appellant has also pointed out that even his office set-up faced work disruption due to Covid and hence the inability to send a timely response. The abnormal situation caused by the Covid pandemic at that point of time is well recognise ..... X X X X Extracts X X X X X X X X Extracts X X X X
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