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TMI Blog2022 (12) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... opCJ were driving factors that were instrumental in the decision of the promoters/ex-directors of the corporate debtor to set up a new company Y2Y Fashions International Limited which would do website hosting, and provide a number of services as covered in the T-commerce Vendor Agreement. We are convinced by the argument of the Appellant that this was done in the normal course of business to let the corporate debtor function in the changed business environment. Such an arrangement, even though with related party, cannot be termed as preferential transactions done to defraud the creditors of the corporate debtor. We are of the clear view that the Adjudicating Authority has committed an error in arriving at the inference that the amount of Rs.83.97 lakhs was transferred by the corporate debtor to Y2Y Fashions Pvt. Ltd., a related party, and is, therefore, a diversion by the corporate debtor and Y2Y Fashions Pvt. Ltd. with an intention to defraud the creditors of the corporate debtor by the ex-directors of the corporate debtor. Ex-directors of the corporate debtor and Y2Y Fashions Pvt. Ltd. shall not be liable to make contribution to the extent of Rs. 83.97 lakhs in the account of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any Y2Y Fashions Private Limited was incorporated to help the corporate debtor to sell its huge inventory stock as its former premises had been "sealed" as a result of Hon'ble Supreme Court's order and many items in stock such as furniture/partitions of work spaces/storage shelves were created according to the specifications of the old warehouse, which if not sold to the new company, would have been sold in open market as junk causing huge loss to the corporate debtor. 4. The Appellant has claimed that section 10 application for the insolvency resolution of the corporate debtor was admitted by the order dated 6.6.2019 passed by the Adjudicating Authority, and Corporate Insolvency Resolution Process (in short 'CIRP') of the corporate debtor is in progress. He has added that during the CIRP, a forensic and transaction audit of the corporate debtor was conducted by the Resolution Professional and in view of certain observations in the Forensic and Transaction Audit Reports, an IA No. 1601/2019 was filed by the Resolution Professional for certain avoidance transactions, which was later withdrawn with liberty granted to the Resolution Professional to file a fresh application under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as hosting of website and technological backup, packing, logistics and payment etc. She has also submitted that the commission for selling goods on portals like that of Y2Y Fashions, is in general practice, somewhat higher than the standard retail commission paid to offline sale agents, and therefore, the commission charged by Y2Y Fashions is as per market practice and Y2Y Fashions was paying similar commission to other clients. 8. The Learned Counsel for Appellant has explained that what has been termed as 'commission' is actually a total amount that is inclusive of service fees paid for hosting website and technology, customer support, logistics services, packing and other related services to ensure customer satisfaction and therefore, the finding in the Transaction Audit Report with respect to the commission/sale expenses is flawed and ought to have been ignored by the Adjudicating Authority after considering the reasons for the somewhat higher charges termed as 'commission'. She has further argued that disposal of tangible assets by sale by the corporate debtor to Y2Y Fashions cannot, therefore, be called fraudulent transaction with intention to defraud the creditors, but they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to be deposited in account of the corporate debtor, is absolutely correct in facts and circumstances of the case. 11. We note that the T-Commerce Vendor Agreement was entered between the corporate debtor and a company called Y2Y Fashions Private Limited on 17.3.2018 (copy attached at pgs.252-260 of the appeal paperbook, Vol.II) by which the company Y2Y Fashions Private Ltd. Offered its online marketing platform to the Vendor Company Y.S, Marchandise International (the corporate debtor) to sell its products through the said platform. It is also noted in the T-Commerce Vendor Agreement Mr. Randhir Singh Tomar/ Appellant represents Y2Y Fashions Pvt. Ltd. and also Y.S. Merchandise International Pvt. Ltd. i.e. both the signing parties. The arrangement between the two companies was that the company Y2Y Fashions Pvt. Ltd. shall offer to the vendor Y.S. Merchandise International Pvt. Ltd. its services through "OneIndiaTV" Infrastructure for facilitating sales to the Vendor's products, and the services shall include hosting and technology, customer support, logistics services, payment services and all the other related services to ensure customer satisfaction on behalf of the Vendor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any other DTH service providers. We also note the Appellant's contention that the commission/charges recovered from the corporate debtor actually related a number of services such as operational cost, hosting website and technology, customer support, logistics services, packing and other related services to ensure customer satisfaction which were all included in one term 'commission'. This contention of the Appellant is supported by clause 2.1 of the T-Commerce Vendor Agreement, which is reproduced above, and therefore clearly appears to be done as part of normal business arrangement between Y2Y Fashions and the corporate debtor. 14. The Adjudicating Authority has dealt with the issue of the excess payment made by way of commission to Y2Y Fashions in para 15 of the Impugned Order, wherein the following is observed:- "15. On perusal of the Transaction Audit Report and the Forensic Audit Report referred to supra, so far as the Transections referred to in the applications are concerned, we observe that the Auditor's opinion is that these Transactions and the agreement for increasing the commission on 17th March, 2018, were made with the related party. That it is also mentioned in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate debtor decided to float a new company Y2Y Fashions Pvt. Ltd. and the agreement between the two companies Y2Y Fashions Pvt. Ltd. and the corporate debtor took place on purely commercial consideration. We also note his contention that this explanation was provided to the Transaction Auditor, who without considering the basis and nature of the transaction, merely looked at the fact that both the corporate debtor and the new company Y2Y Fashions Pvt. Ltd. have the same set of directors and promoters, and decided that the said transactions were infringement of section 43 of IBC. 19. We find substance in this claim when we peruse the percentage of commission, which rose from 5% in the Financial Year (FY) 2016-17 to 20% in the FY 2017-18 and further to 32% in the FY 2018-19 with the fact that the T-Commerce Vendor Agreement between the two companies was entered on 17.3.2018, and also the fact that the term 'commission' included many services being provided by the Y2Y Fashions Company in accordance with clause 2.1 of the T-commerce Vendor Agreement. Thus, an increase in commission percentage of 32% in the FY 2018-19 is appropriately explained by the Appellant as being related to 'c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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