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TMI Blog2024 (4) TMI 869X X X X Extracts X X X X X X X X Extracts X X X X ..... us and seem to have been filed with the view to delay the proceeding. Appellant in the application has not claimed the application is being filed by any authorization of the Board. In the reply which was filed by Respondent No.2, which is also on the record, does not indicate that Respondent No.2 claimed any board resolution for filing reply on behalf of the Corporate Debtor. When reply filed by Respondent No.2 dated 09.05.2023 did not claim any board resolution for filing reply, we fail to see that how the application filed by the Appellant can be rejected on the ground that there is no board resolution supporting filing of the application. Appellant has filed the application as Director of the Corporate Debtor to bring various facts which according to the Appellant indicate that there is collusion between Respondent No.2, 3 and the Financial Creditor and several relevant facts have not been brought before the Adjudicating Authority by Respondent No.2 in his reply. The facts and material brought on the record does indicate that there has been serious dispute between the Directors inter se and a Memorandum of Understanding was also executed on 2901.2022, in which Memorandum of Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Supreme Court and this Tribunal, in the CIRP, Resolution Plan was received and approved by the CoC on 24.01.2024 and an application has been filed before the Adjudicating Authority for approval of the Resolution Plan. Submission raised by the Appellant needs consideration. Issue notice. Shri Nayar accepts notice on behalf of Respondent No.1. Learned counsel appearing for Respondent No.5 accepts notice. Issue notice to other Respondents. Let Reply be filed within two weeks. Rejoinder be filed within one week thereafter. List this Appeal on 11.03.2024. Learned counsel for the Resolution Professional submits that he shall seek adjournment before the Adjudicating Authority on the application filed for approval of the Resolution Plan, till the next date. 2. A reply has been filed by the Respondent No.1 to which rejoinder has also been filed by the Appellant. Before we notice the contentions raised by learned counsel for the parties in this appeal, it is relevant to notice certain background facts giving rise to this appeal. (i) The Appellant along with Respondent No. 2 - Jayant Vallabhdas Kaneria, Respondent No.3 - Dhirajlal Gordhandas Hansalia and Respondent No.4 - Mohan Pandurang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Corporate Debtor to take credit from Motilal Oswal. Appellant sent various letters to Respondent No.2 and 3 to comply the terms of Memorandum of Understanding. (xi) Respondent No.2 and 3 provided copy of conditional NOC issued by Motilal Oswal. Various correspondences were exchanged between the parties. Financial Creditor also acknowledged the settlement between the parties vide letter dated 04.05.2022. (xii) Appellant sent a letter to Respondent No.2 and 3 to provide accounts of the Corporate Debtor and details of the Return, which was not replied. (xiii) Appellant filed Civil Suit being Special Civil Suit No.2182/2022 praying for decree of injunction as well as specific performance of Memorandum of Understanding. In the Civil Suit interim injunction was granted on 14.10.2022 restricting Montvert Group from dealing with properties mentioned in the schedule including plots of the Corporate Debtor. (xiv) Appellant has previously filed written complaint dated 07.07.2022 at Wakad Police Station addressing various illegal activities, fraudulent actions and forgery of documents allegedly committed by Respondent Nos. 2 and 3 in collusion with Respondent No.1, Motilal Oswal and others. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r counsel appearing for Respondent No.1. 4. Learned counsel for the Appellant challenging the order impugned passed by the Adjudicating Authority submits that the Adjudicating Authority has committed error in rejecting I.A. No.2002/2023 filed by the Appellant. It is submitted that in the Application the Appellant has pleaded that Section 7 application filed by Respondent No.1 has been filed in collusion with Respondent No.2 and 3. Respondent No.2 has been falsely claiming to be authorized person of the Company and filed reply on 09.05.2023 without there being any authorization. There is a collusion between Respondent No.2 and Financial Creditor and the Appellant has come to know about various malafide acts committed by Respondent No.2 and 3 seriously jeopardizing the Appellant and other shareholders. Memorandum of Understanding dated 29.01.2022 has not been complied as per which Respondent No.2, 3 and other members have agreed to retire from the shareholding of the Corporate Debtor and other companies but instead of retiring from the shareholding they continued to act as Directors of the Corporate Debtor. It was agreed that Respondent No.2 and 3 shall transfer their respective shar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant. Appellant is only a Director of the Corporate Debtor having only 16.66% shareholding whereas Respondent No.2 has 27.50% shareholding and Respondent No.3 has 22.50% shareholding. The internal dispute between Appellant and Respondent No.3 cannot be made subject matter of adjudication in proceeding under Section 7 initiated by the Financial Creditor. It is further submitted that this Tribunal while dismissing Company Appeal (AT) (Ins.) No.742 of 2023 filed by the Appellant challenging the order dated 19.05.2023 admitting Section 7 application has observed that rejection of the application of the Appellant was in accordance with law. In view of the order passed by this Tribunal dated 05.10.2023 dismissing Company Appeal (AT) (Ins.) No.742 of 2023 where the rejection of the application has also been upheld, this appeal need to be dismissed. It is submitted that the Appellant in his application being I.A. No.2002/2023 has nowhere pleaded that there is no debt and default by the Corporate Debtor. Appellant being party to the Debenture Trust Deed dated 29.04.2018, in which Corporate Debtor had undertaken to make the payment along with interest and payment having not been made. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant on which much reliance has been placed has already been stayed by Bombay High Court vide order dated 28.08.2023 in Writ Petition No.1725 of 2023 which fact has not been mentioned on behalf of the Appellant. It is submitted that in so far as resolution passed by the Corporate Debtor is concerned, the creditor is entitled to rely on doctrine of indoor management which entitle an outsider to presume that all actions by the company are being done in accordance with the Articles of Association and Memorandum. Shri Nayar has relied on CP Satisfaction Notice dated 01.11.2019 which was signed by the Appellant where the Company has confirmed fulfilment of conditions as per Clause 4 of the Debenture Trust Deed dated 26.11.2018, hence, the Appellant cannot deny the facility extended by Debenture Trust Deed. Learned counsel for the Respondent No.1 has relied on judgments of Hon ble Supreme Court and High Court which shall be referred to while considering submissions in detail. 6. Learned counsel for the Appellant in his rejoinder submits that dispute is not merely between the shareholders. In the first information report (FIR) filed by the Appellant, the Appellant has challenged the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporation the share holding pattern of the said Company was: Mr. Sanjay Pandurang Kalate - 16.66% Mr. Mohan Pandurang Kalate - 16.67% Mr. Mayur Pandurang Kalate - 16.67% Mr. Jayant Vallabhdas Kaneria - 27.50% Mr. Dhirajlal Goradhandas Hansalia - 22.50% b. The Applicants states that, said Mr. Kaneria is habitual to behave in an arbitrary and illegal manner and has time and again prejudiced the interests of the said Company. It is the specific case and contentions of the Applicant that there is collusion between said Mr. Kaneria and Financial Creditor. c. The Applicant learnt about various malafide acts committed by said Mr. Kaneria and Mr. Hansalia in the said Company, severely jeopardising the interests of the said Company, the Applicant and the other shareholders. d. Thereafter disputes arose between the Directors of the said Company leading to execution of a family settlement deed dated 31 October 2019 read along with MOU dated 05th November 2019 and 29th January 2022. e. Under the aforesaid agreements, Mr. Kaneria, Mr. Hansalia and Mr. Mohan Kalate ( the said other Directors ) agreed to retire as directors of the said Company and transfer their respective shareholding in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rately kept uninformed about the existence of such mortgage deed. iv. No due diligence appears to have been carried out by the Financial Creditor prior to executing the alleged Deed of Mortgage and the due diligence report was not supplied despite of demand made by the Applicant. v. Further, upon procuring a copy of the said Mortgage Deed, the Applicant has learnt about a Term sheet dated 11th September 2018 annexed thereto, allegedly executed by Mr.Kaneria and Mr.Hansalia, on alleged behalf of the said Company, agreeing to avail credit facility from Motilal Oswal. vi. Upon perusal, it appears that the said Term sheet was executed even before the incorporation of the said Company and prior to obtaining rights over the allegedly mortgaged properties and the same was never disclosed to the Applicant. vii. Further Applicant has also come across an alleged board resolution dated 9th January 2019 annexed to the said Mortgage Deed, allegedly passed by the said Company. The said board resolution erroneously approves the Company to avail a credit facility and security interest for an amount not exceeding Rs.75 Crores. viii. Firstly, no such board meeting was ever conducted and if so, the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter. c) Pending hearing and final disposal of the present application, this Hon'ble Tribunal be pleased stay the effect and implementation of order dated 11th May 2023 and de-reserve the captioned petition for orders. 15. Now we come to the order which was passed by the Adjudicating Authority rejecting the application. The Adjudicating Authority in the impugned order has although noted certain submission of the Appellant made in the application but held that there being no authorization of the Board of Directors to file the application, application appears to be frivolous and seem to have been filed with the view to delay the proceeding. Appellant in the application has not claimed the application is being filed by any authorization of the Board. In the reply which was filed by Respondent No.2, which is also on the record, does not indicate that Respondent No.2 claimed any board resolution for filing reply on behalf of the Corporate Debtor. When reply filed by Respondent No.2 dated 09.05.2023 did not claim any board resolution for filing reply, we fail to see that how the application filed by the Appellant can be rejected on the ground that there is no board resolution s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Allegations has also been made against Respondent No.2 and 3 with regard to finances of the Corporate Debtor. The application also pleaded that there was collusion between Respondent No.2, 3 and the Financial Creditor. It is true that allegation regarding collusion or malafide is easy to allege but difficult to prove. The Adjudicating Authority had no occasion to examine the allegation any further since he proceeded to reject the application on the ground that it is not supported by resolution of the board of the Corporate Debtor. 18. We may notice certain judgments which has been relied by learned counsel for the Appellant. Appellant has placed reliance on judgment of this Tribunal in Company Appeal (AT) (Ins.) No.24 of 2022, CFM Asset Reconstruction Pvt. Ltd. vs. Swatantra Kumar Anr. where in Para 11 and 13 following has been laid down: 11. The application by the Appellant was competent application filed under Section 60(5) of the Code r/w Rule 11 of NCLT Rules, 2016 and under Section 65 of the Code and the Adjudicating Authority was obliged to look into the allegations to find out if there is any ground to grant any of the prayers made in the application. The finding of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Adjudicating Authority is well within its jurisdiction to consider the Application and if it is held and found that initiation is fraudulent and malicious, the Adjudicating Authority is fully entitled to reject the said Application. 21. Learned counsel for the Appellant has also relied on judgment of Hon ble Supreme Court in Beacon Trusteeship Limited vs. Earthcon Infracon Private Limited and Another, Civil Appeal No.7641 of 2019, decided on 18.02.2020 , where in Para 7 and 8 Hon ble Supreme Court observed: 7. Considering the provision of Section 65 of the IBC, it is necessary for the Adjudicating Authority in case such an allegation is raised to go into the same. In case, such an objection is raised or application is filed before the Adjudicating Authority, obviously, it has to be dealt with in accordance with law. The plea of collusion could not have been raised for the first time in the appeal before the NCLAT of before this Court in this appeal. Thus, we relegate the appellant to the remedy before the Adjudicating Authority. 8. In case, a proper application is filed, aspect whether the proceedings have been Initiated in collusive manner will be looked into, in accordance wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Division Bench of Allahabad High Court in the matter of Lakshmi Ratan Cotton Mills Co. Ltd., Kanpur vs. J. K. Jute Mills Co. Ltd., Kapur, AIR 1957 AII 311 . It is submitted that doctrine of indoor management has been accepted and reiterated in the above case. Reliance has been placed on Para 24, which is as follows: 24. In view of the above provisions, there can be no doubt that Sri Gulab Chand Jain who was the director of the defendant company, the director of the managing agency and also a delegate of the managing agency could be authorised to enter into this transaction. Under the above circumstances, even supposing that there was no actual resolution authorising him to enter into this transaction on behalf of the defendant company either by the Board of Directors or by the Board of Managing Agents the claim of the plaintiff who was a creditor cannot be affected. A creditor dealing with a trading company is required by law to be conversant with the terms of its Memorandum and Articles of Association and no more. If it is found that the transaction of loan into which the creditor is entering is not barred by the charter of the Company or its Articles of Association, and cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the Appellant challenging the order dated 19.05.2023 admitting Section 7 application has already upheld the rejection of I.A. No.2002/2023, which contention has been noticed. Learned counsel for the Respondent has referred to Para 17 of the judgment, which is as follows: 17. We are inclined to agree with the reasoning of the Adjudicating Authority in dismissing the IA. It is a settled proposition of law that to prove any transaction to be collusive and fraudulent in nature, the degree of proof and evidence required should be of unimpeachable nature and beyond reasonable doubt. In a matter as serious as this where an imputation of fraud is being made by the Appellant on behalf of the Corporate Debtor against the Respondents, the Adjudicating Authority has rightly held that allowing such an application, without approval of the Board would suffer from impropriety and hence dismissed it as a frivolous and vexatious. While we prima-facie agree that a collusive Section 7 petition can be rejected as has been laid down in the Hytone (supra) ratio, we must hasten to add the inapplicability of that judgment since in that case the Corporate Debtor was trying to escape its liability as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent No.2 seeks time to file a brief reply, annexing the documents on which Respondent No.2 places reliance. 2. At his request, stand over to 20th September 2023. 3. Till the next date, ad-interim relief in terms of prayer clause (g). 30. The ad-interim relief was granted by the Bombay High Court in prayer g of the Writ Petition. Prayer g as claimed in the Writ Petition is as follows: g. That pending the hearing and final disposal of this Petition, this Hon'ble Court be pleased to stay the further investigation in the Impugned FIR bearing No. 0253 dated March 14, 2023 registered by Wakad Police Station, Pune; 31. The order staying the further investigation was passed on 28.08.2023 whereas the impugned order against which this appeal has been filed was passed on 17.05.2023 by which date there was no stay on the investigation. Further, the appeal has been filed by the Appellant in this Tribunal on 10.07.2023 by which date also order of stay was not passed by the Bombay High Court. We, thus, are of the view that in the appeal there was no occasion to disclose the order dated 28.08.2023 which was passed subsequent to filing of the Appeal. The pleading in the application I.A. No.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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