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TMI Blog2024 (5) TMI 999X X X X Extracts X X X X X X X X Extracts X X X X ..... tor, Royal Refineries Private Limited (hereinafter referred as RRPL) was admitted in Corporate Insolvency Resolution Process (hereinafter called as CIRP) by order dated 13.11.2019 and Mr. Nandkishore Deshpande was appointed as Interim Resolution Professional (IRP). IRP was later confirmed as RP. It is stated that corporate debtor RRPL was engaged in the business of Trading in Bullion i.e. importing Gold and then exporting the same after performing manufacturing activity over the imported gold. The Corporate Debtor also engaged in sale/ purchase of gold in the local market. 3. In May 2019, RRPL and its associated concerns and persons were searched by the Department of Revenue Intelligence (hereinafter referred as DRI). It is stated that the business operations of the corporate debtor had virtually stopped since May 2019. After search by DRI, following findings were recorded by the Joint Commissioner of Customs in his order dated 04.02.2021:- "I find from the investigation conducted by DRI and the statements of the Directors and employees of RRPL., that RRPL was a front company run by Shri Manoj kumar Babulal Punamiya. Shri Manoj kumar Babulal Punmaiya appears to have arranged fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om RICL to RRPL from 27.7.2019 to 27.8.2019 and the balance payable to RRPL has been brought down to Rs. 31,01,83,022/-. 4.6 The AA noted that refinery generally sells gold to the jewellers after refining them and rarely purchases gold from jewellers. 4.7 The AA noted that fraudulent entries of sale by RICL to RRPL are made only subsequent to the DRI raids in May 2019 onwards. 4.8 The AA held that as per the provisions of Section 66 "recovery can be made from any person who had participated in the fraudulent transaction and had benefitted from it". 5. The appellant had filed an I.A. No. 2802 of 2021 seeking permission to file additional documents. The appellant was allowed to file the additional affidavit vide this Tribunal order dated 8.5.2023. 6.1 In its oral and written submissions, the appellant had submitted that the proceedings under Section 66 of IBC, 2016 are not maintainable against the appellant as the Resolution Professional has not given clear opinion or determination or finding as required under Regulation 35 A. It was submitted that the RP has not brought out any supporting documentary evidence to show that the transaction between the appellant and the corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mained outstanding for more than two years; that pursuant to certain bogus and sham transactions detected, raids were conducted by the Department of Revenue Intelligence (DRI) and that the operation of the Corporate Debtor ceased from May 2019 onwards. It was further submitted that the Appellant does not dispute that the total liability owed to the Corporate Debtor was Rs. 1,58,07,56,469/- as on 20.05.2019 but it is the Appellant's case that transaction with Corporate Debtor after May, 2019 till the commencement of CIRP has reduced the outstanding amount to Rs. 31,01,83,022/-. It was submitted by the RP that entries made in the books of accounts were clearly fraudulent and the amount due to Corporate Debtor was brought down through these entries from Rs. 158 crores to Rs. 31 Crores. 7.2 The Resolution Professional further submitted that no stock of gold bullion had been found in the premises of Corporate Debtor in May, 2019 during raids by DRI and that no physical inventory was found in the premises of Corporate Debtor on taking over by Resolution Professional in November, 2019. It was submitted by Resolution Professional that sudden change in nature of transaction between the Cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anoj Punamia had companies like M/s Balaji Bullion & Commodities Pvt. Ltd., M/s Balaji Lifestyle Pvt. Ltd. and M/s Royal India Corporation Ltd. (previously known as M/s Natraj Financial Limited). In his statement recorded by DRI, which he later retracted, Mr. Manoj Punamia had stated that M/s Royal India Corporation Ltd. (Appellant herein) had three Directors, namely Shri Sharad Budhkaran Sharma, Ms. Madhusa Inda and Shri Nitin Gujral and he is and his wife were shareholder of 18.3% and 12.66% of RICL. He admitted that Directors of RICL work as per his instructions. 7.7 It was further submitted by Respondent No. 1 that the Resolution Professional complied with all the requirements of Regulation 35-A of the CIRP Regulation and in the first CoC meeting he had informed the CoC that the business of Corporate Debtor is not supported from the available physical inventory. The Resolution Professional had sent several e-mails to the Appellant asking for details regarding transactions and obtained the seized records of Corporate Debtor from DRI, on analysis of which he made clear determination regarding fraudulent activities and decided to initiate proceeding under Section 66 of IBC agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Debtor. Only thereafter, Application under Section 66 IBC was filed thereby showing that the Resolution Profession had complied with the Regulation 35A of IBBI (Resolution Process for Corporate Persons), Regulation 2016. 10.2 We now examine the Appellants objection that proceedings under Section 66 of IBC, 2016 cannot be taken against the third parties. Before proceeding any further, it will be relevant to refer to the provisions of Section 66(1) of IBC, 2016 which is reproduced below:- 66. (1) If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit. As per provisions of sub-section (1), the Adjudicating Authority can pass an order directing "any person", who was party to carrying on the business of Corporat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at company. Obviously, the persons referred to in Section 339(1) as person who are other than the parties 'to the carrying on of the business in the matter aforesaid" which again refers to the business of the company which is being mismanaged and not to the business of another company or other persons. 8) This being the case, it is clear that powers under the sections cannot possibly be utilized in order that a person who may be the head of some other organization be roped in, and his or her assets be attached. This being the case, we set aside the impugned order passed by the NCLAT as well as the NCLT. The appeal is allowed in the aforesaid terms." 10.5 The facts of the present case are different and distinguishable from the cases cited by the Appellant. In the present case, there is a finding that Manoj Punamia was running several companies in its business of gold refinery. The finding of the Customs Department was that both the Appellant Company (RICL) and Corporate Debtor (RRPL) were being managed by Mr. Manoj Punamia. Mr. Manoj Punamia and his wife were said to be shareholders of the Appellant Company. In these circumstances, the appellant cannot be said to be a third par ..... X X X X Extracts X X X X X X X X Extracts X X X X
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