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TMI Blog2023 (4) TMI 926X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax due could be recovered from sale of the subject property to safeguard the interests of stakeholders particularly the Service Tax Department, Government of India. All the four creditors of the Corporate Debtor in the present case are statutory creditors being government departments. In respect of two statutory creditors, namely, EPFO and Income Tax Department, the amounts due and payable by the Corporate Debtor have been settled by the Appellant and the payments made. A copy of the settlement dated 21.01.2023 submitted to the EPFO office on 27.09.2023 is at Annexure A-2 in Appeal Paper Book No.275 of 2023. As regards, the third statutory creditor namely ESIC, the settlement proposal was placed before the Hon ble High Court of Delhi for taking on record. Thus, prima-facie, the claim of three statutory creditors appears to have been settled and therefore can be considered to have been more or less extinguished. The sole surviving statutory creditor is the Department of GST which undisputedly happens to be the creditor with majority share. Keeping in view that the reserve price for auction of the subject property has been kept at Rs.1.75 crore by the liquidator, whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o settle all dues of the statutory creditors by complying with the directions imposed. - Company Appeal (AT)(Insolvency) No. 275 of 2023 Company Appeal (AT)(Insolvency) No. 276 of 2023 Company Appeal (AT)(Insolvency) No. 277 of 2023 Company Appeal (AT)(Insolvency) No. 344 of 2023 - - - Dated:- 21-4-2023 - [ Justice Ashok Bhushan ] Chairperson And [ Barun Mitra ] Member ( Technical ) For the Appellant : Mr. Abhijeet Sinha , Mr. Apoorv Agarwal , Ms. Neha, Mr. Manav Goyal , Advocates For the Respondent : Mr. Sameer Rastogi , Advocate , Mr. Sarvesh Kashyap , Liquidator JUDGMENT [ Per : Barun Mitra , Member ( Technical ) ] Aggrieved by the impugned order dated 22.02.2023 passed by the Adjudicating Authority (National Company Law Tribunal, New Delhi Bench, Court-II, New Delhi) in I.A. No. 1026/2023, I.A. No. 951/2023, M.A. No. 05/2022 and I.A. No. 224/2023 in C.P (IB) No. 35(ND)/17, four separate appeals have been filed by the Appellant under Section 61 of the Insolvency and Bankruptcy Code ( IBC in short). 2. The Appellant in the present case is Shri T.S. Murali, promoter and ex-Director of M/s Helpline Hospitality Pvt. Ltd. (hereinafter referred to as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ebtor who resigned from the position of Director in 2006. The Appellant thereafter continued as CEO of the Corporate Debtor till initiation of CIRP in 2017. Subsequent to initiation of CIRP, the claims of the Operational Creditor were rejected by the Resolution Professional on the ground that the balance sheet of the Corporate Debtor did not support the claim. Further, within three months of commencement of CIRP, the Resolution Professional on raising the grounds of the unknown whereabouts of the Corporate Debtor, the Adjudicating Authority allowed initiation of liquidation proceedings on 11.10.2017. The Resolution Professional was appointed as the liquidator. During the liquidation proceedings, an interim Forensic Audit Report was brought on record on 10.11.2018 which was followed by the Final Forensic Audit report on 02.01.2019. The Interim Forensic Audit Report had noticed that the Corporate Debtor had taken a loan of Rs.36,59,250/- from ICICI vide agreement dated 30.04.2004 for a tenure of 104 months which period ended on 22.07.2013. The loan was for acquiring asset located at Plot No. C-158, Sector 41, Noida, Uttar Pradesh. It was also noted that the subject property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 of 2022 but the same was also dismissed on 28.11.2022. The Appellant thereafter approached the Hon ble High Court of Delhi by filing WP(C) No.17431/2022 for quashing the e-auction notice allowed by the Adjudicating Authority. The said writ petition was remitted back by the Hon ble Delhi High Court to the Adjudicating Authority on 20.12.2022 for its consideration on the ground that Adjudicating Authority had requisite jurisdiction to deal with the same. The Appellant had filed another Writ Petition No. 232/2023 before the Hon ble High Court of Delhi which was also disposed of on 09.01.2023 directing the Appellant to give keys of the subject property to the Liquidator on 23.01.2023. An undertaking from the Appellant recording that keys would be handed over was also taken. Subsequently, the Writ Petition No. 17431/2022 filed before the Hon ble Delhi High Court which was transferred to the Adjudicating Authority as M.A. No.05/2022 was dismissed on 22.02.2023. The Adjudicating Authority rejected the application filed by the Appellant challenging the auction process and passed orders vacating the stay on the sale of subject property. The liquidator was directed to proceed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76/2023 a) Pass an order setting aside the Impugned Order dated 22.02.2023 passed by the Hon ble Adjudicating Authority in I.A. No.224(ND)/2023 filed in CP(IB) No.35(ND)/2017; b) Grant continuation of stay on the e-auction of the property bearing no. G-158, Sector-41, Noida, UP; c) Grant ad-interim stay on e-auction of the Property bearing no. G-158, Sector-41, Noida, UP and further proceedings in the CP(IB) 35 of 2017; d) In the alternative, Grant ad interim stay on the e-auction of the Property bearing no.G-158, Sector-41, Noida, UP and allow the Appellant to pay rent for the mentioned property until the Auction is undertaken; e) Pass any other such further orders as deemed fit in the facts and circumstances of the present case. 277/2023 a. Pass an order setting aside the Impugned Order dated 22.02.2023 passed by the Hon ble Adjudicating Authority in I.A. No.1026(ND)/2023 filed in CP(IB) No.35(ND)/2017; b. Pass an order directing the Liquidator of the Corporate Debtor to place on record the documents sought in the IA No.1026/2023 by the Appellant herein and; c. Grant ad-interim stay on e-auction of the attached property of the Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment process was placed before the Hon ble Delhi High Court. It was stressed that though the Appellant had been constantly approaching the statutory creditors so as to settle their dues, the liquidator had been deliberately blocking every possible attempt of settlement step taken by the Appellant. It was also submitted that the Adjudicating Authority in the impugned order has also been equally non-appreciative of the bonafide efforts made by the Appellant to settle the claims of the Corporate Debtor. 12. Advancing his arguments further, it was submitted that though the Appellant had made an express desire to settle with the fourth creditor i.e., the GST Department, he has been unable to do so since the liquidator rejected their request to share the relevant documents required for the purpose of settlement. It was vehemently argued that the action of the liquidator was violative of the intent of the IBC which is to resolve the companies from their distressed financial conditions and not to drive them into liquidation. 13. Submitting further that the Appellant being the promoter, shareholder, founder and ex-director of the Corporate Debtor and having been involved in the day-to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quidator when he pressed for commencement of liquidation proceedings. 16. The Learned Counsel for the Respondent/Liquidator refuting the above submissions of the Appellant has contended that the aforesaid set of appeals have been filed with the ulterior motive to delay and derail the liquidation process of the Corporate Debtor and to grab the subject property which is already under the illegal possession of the Appellant. An application under Section 66 of IBC has been filed against the Appellant for acquiring the subject property by using the funds of the Corporate Debtor and fraudulently recording the same in his own name. 17. It is the contention of the liquidator that funds were withdrawn from the company account which has been treated as siphoning of money and cheating, fraud, and mis-representation of company s financial position in the forensic audit report. It has also been observed in the said audit report that the total amount diverted is Rs.65,29,836.56 and therefore liable to be recovered with 18% interest from the erstwhile Director of the Corporate Debtor. The report also noted that the Corporate Debtor evaded Service Tax of Rs.3,91,04,886/- for which the GST De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orporate Debtor as held by this Tribunal in Company Appeal (AT) (Ch) (Ins.) No.142 and 174 of 2022. 21. We have duly considered the arguments and submissions advanced by the Learned Counsel for the parties and perused the records carefully. 22. The moot point for consideration is whether the liquidation proceedings should be allowed to proceed or whether an opportunity with a strict time-frame can be given to the Appellant to settle the dues of the Corporate Debtor in the interest of justice, fairness and equity. 23. There is no quarrel over the fact that the Corporate Debtor had taken a loan of Rs.36,59,250/- from ICICI on 30.04.2004 for acquiring the subject property and that the said asset is registered in the name of present Appellant though he was only a co-applicant of the loan. It is also a factual statement that the forensic audit report while estimating the value of subject property at Rs. 4 crore had also observed that the subject property should be transferred to the Corporate Debtor so that Service Tax due could be recovered from sale of the subject property to safeguard the interests of stakeholders particularly the Service Tax Department, Government of India. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present case are statutory creditors being government departments. In respect of two statutory creditors, namely, EPFO and Income Tax Department, the amounts due and payable by the Corporate Debtor have been settled by the Appellant and the payments made. A copy of the settlement dated 21.01.2023 submitted to the EPFO office on 27.09.2023 is at Annexure A-2 in Appeal Paper Book No.275 of 2023. As regards, the third statutory creditor namely ESIC, the settlement proposal was placed before the Hon ble High Court of Delhi for taking on record. Thus, prima-facie, the claim of three statutory creditors appears to have been settled and therefore can be considered to have been more or less extinguished. The sole surviving statutory creditor is the Department of GST which undisputedly happens to be the creditor with majority share. 27. Keeping in view that the reserve price for auction of the subject property has been kept at Rs.1.75 crore by the liquidator, while the claim of the GST department is Rs.8.04 crore, prima- facie, it appears that even after liquidation, there is a likely possibility that the dues of this statutory creditor may remain unmet. We are also inclined to accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d an error in rejecting the request of the Appellant to take on record the settlement proposal with EPFO on grounds of locus standi. 30. Keeping in view the peculiar facts of the present case and the ground situation, we hold that the liquidator should assume a more positive approach in resolving the distressed position of the Corporate Debtor and not shun the bona-fide efforts being made by the Appellant in this direction to clear the debt of the Corporate Debtor. 31. The spirit, tenor and objective of IBC being that of a beneficial legislation and not penal, we are of the considered view that the Adjudicating Authority instead of penalizing the Appellant by allowing attachment of the subject property where he was residing, ought to have given an opportunity to the Appellant to settle with the fourth statutory creditor rather than straightway allowing the auction of the subject property. 32. Given that the Appellant has all along been making genuine efforts to settle the claims of the statutory creditors, we see no harm in giving a chance to the Appellant to arrive at a settlement with the statutory creditor but we hasten to add that this settlement has to complete within ..... X X X X Extracts X X X X X X X X Extracts X X X X
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