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TMI Blog2023 (12) TMI 1322X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to the specific details and documents. There is no denial in the RP s reply with respect to 164 Buyers listed in Page 25 onwards of CP, comprising of sale of 2,43,037 sq. ft. in total by the R-1 Company, whereas, they were entitled to ownership of only 82,216.30 sq. ft. as per the JDA. This excessive sale, three times of their entitlement by the R-1 Company, has neither been explained nor has any denial been filed. Furthermore, there has been allegation regarding the fake Lease Agreement with R-16 and R-17 to lure the Buyers with a false promise of assured rental return which was non-existent, for which, the Petitioners have also filed the specific documents for such Lease Agreements with R-16 and R-17. However, in the reply filed by RP on behalf of the R-1 Company, no explanation has been furnished about the same. The investigation under Section 213 of the Companies Act, 2013 is possible in respect of the Company which is undergoing the process of liquidation. Therefore, by exercising powers under Section 213 of the Companies Act, 2013, the instant Petition deserves to be allowed. Petition allowed. - HON BLE JUSTICE (RETD.) T. KRISHNAVALLI, MEMBER (JUDICIAL) AND HON BLE SHRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition to that the Owners got the entire built-up area on the 3rd, 4th, 7th and 8th Floors and the Company got the entire area on 5th, 6th, 9th and 10th Floors. The Schedule demarcating the shares of the Owners and shares of the Company in VSPL Pinnacle are produced hereunder as per Supplementary Agreement Schedule B C. Schedule B 50% Undivided share, right and income in Schedule A Property and 82216.30 Sq. ft. of built up area allocated to the share of Owners as described below: Sl. No. Floor Super Built up Area in Sq. Ft. Undivided Interest in Land allotted to the Flat (in Sq. ft.) 1. Ground Floor Northern Portion 6262.88 1589.24 2. 1st Floor Southern Portion 6224.45 1579.60 3. 2nd Floor Northern Portio 7427.87 1884.91 4. Entire 3rd Floor 14855.00 3770.07 5. Entire 4th Floor 14855.00 3770.07 6. Entire 7th Floor 13014.00 3302.84 7. Entire 8th Floor 13014.00 3302.84 8. 11th Floor Southern Portion 6507.23 1651.42 Total 82216.30 20851.00 Schedule C 50% Undivided share, right and income in Schedule A Property and 82216.30 Sq. ft. of built up area allocated to the share of Developer as described below: Sl. No. Floor Super Built up Area in Sq. Ft. Undivided Interest in Land allotted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sale to the Company, the Company has collected a total sum of Rs. 136,50,19,085/- (Rupees One Hundred Thirty-Six Crores Fifty Lakhs Nineteen Thousand and Eighty-Five Only) by executing 164 Sale Deeds or Agreement to Sell to different persons and collected the above-mentioned amount as sale consideration from them. In addition to the said amount the Company and its said Directors have collected huge amounts of money in cash also. In light of such conduct of affairs of the Company, there is urgent need to conduct enquiry into affairs of the Company and to freeze the assets of the Company, its Directors and the related Parties so that they do not conceal, dilute and divest the assets of the Company to make them unavailable for settlement of claims of the Creditors of the Company in terms of Section 221 of the Companies Act, 2013. (7) Further, the Respondents have acted in concert so the ignorant buyers do not sense that they are being defrauded. To give their plan a realistic picture so cheating and defrauding of the buyers becomes easy and the buyers do not doubt genuineness of the claim of the Company, through its Directors namely Mr. Vikram Prabhakar, Mrs. Aishwarya G.B. and Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to mislead the Petitioners into buying Units in the said Property. (10) Besides showing Lease Agreement with R-16, the Company made Petitioners and other Buyers enter into a Lease Deed for the Property purchased by the buyers with an entity, namely, M/s. Project Craft Solutions so to give a false hope of the Property having regular rental income. Such Lease Deeds were executed merely to give an impression that the investment in the Property is a good commercial decision of the Petitioner and other buyers therefore they should not hesitate in buying it. (11) Further it is stated that the Company has executed numerous bogus sale deeds without property in sale being in existence. The affairs of the Company have not been conducted to do real business but to commit fraud and misfeasance, so the money collected by fraudulently selling the properties are siphoned off from the accounts of the Company to its Directors and other entities including other Respondents herein. R2 to R4 collected huge amount by committing fraud upon the buyers by selling non-existent property by mentioning only area of the Units and the Floor where it is located and executed Agreement to Sale and Sale Deeds acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the same Property and to conceal its fraud therein, it has mentioned only size of the Unit and the Floor so such fraud is not detected by the Allottees, by looking into the thing in isolation in the application filed by a group of buyers u/s 7 of the Code seeking initiation of CIRP against the Corporate Debtor. The said application bearing CP (IB) No. 54/BB/2021 is pending adjudication before this Bench. Therefore, Petitioners seek an investigation into the affairs of the Company and to freeze the assets of the Company and its connected persons. Hence, the present Petition. (16) In support of their submissions, Petitioners inter alia have filed the following documents: i. Balance Sheets for the Financial Years 2016-17, 2017-18, 2018-19 of Respondent No. 1 ii. Joint Development Agreement dated 11.09.2013 executed between the owners of the Project Land and Respondent No. 1 Company iii. Power of Attorney dated 11.09.2013 executed by the owners of the Project Land in favour of the Director of the R-1 Company iv. Supplementary Agreement dated 05.02.2015 executed between the owners of the Project Land and Respondent No. 1 Company v. Assignment Agreement dated 26.07.2019 executed bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the affairs of R-1 Company. (b) On account of R-1 Company undergoing CIRP, all proceedings against R-1 Company are hit by a moratorium u/s 14 of the Code. Thus, any legal proceedings against R-1 Company would automatically be not maintainable. Further, upon commencement of CIRP, the present application has become infructuous as the R-2, 3 and 4 are no longer having any control over the affairs of the Company and RP is representing the R-1 Company. (c) It is stated that the Petitioner s claims have been rejected in CIRP and the Petitioners have chosen to not relinquish their rights and clarify their position in the CIRP. Pursuant to issuance of public announcement on 25.02.2022, the RP received claims from various stakeholders including those of the Petitioners herein, the details of which are as under: Sl. No. Name Claim Submitted (Yes/No) Amount (Rs.) Admitted or Not admitted 1. Ms. Tahera Iqbal Yes 1,35,78,071 Not admitted (since a sale deed holder) 2. Mr. Harshan Goodwin Hector Yes 1,29,62,324 Not admitted (since a sale deed holder) 3. Shailendra Ravi Yes (Jointly with Ms. Arti Ravi) 1,85,48,692 Not admitted (since a sale deed holder) 4. Deepa Narasimha Nayak Yes 1,36,79,025 No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e outside the CIRP of R-1. It appears as though after having willingly executed the Sale Deeds and with an intention to continue with the Sale, the Petitioners are seeking refund of their money on unjust grounds. As stated supra, the Petitioners have chosen to accept the outcome of their claims. The Petitioners having surrendered their rights voluntarily cannot now come forth and disrupt the entire CIRP. (g) It is further stated that the CoC of R-1 in its meeting held on 28.10.2022 have opted to liquate the Corporate Debtor and in this regard an application bearing IA No. 526 of 2022 seeking an order for liquidation has been filed. When the CoC has already decided on the next course of action in the insolvency process of R-1, the Petitioners cannot now try and enter into the CIRP of the R-1 Company. (h) It is contended that CIRP of R-1 has rapidly progressed and stakeholders whose claims have been admitted are now seeking to proceed with the next step in insolvency to recover their claims. At this stage, an order for investigations into the affairs of R-1 will disrupt the entire flow in CIRP. The entire conduct of Petitioners shows that they are seeking to subvert the waterfall mec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Subsequently, vide Diary No. 4037 dated 26.09.2022 it is stated that in compliance to Order dated 23.08.2022, notice was issued upon the unserved Respondent Nos.4, 5, 6, 7, 12, 14 to 17 through Speed Post. Further, R-6, 12, 15 and 16 have accepted the notices. However, when service through physical mode was attempted at the address of R-5, 6, 7 and 17, it was found that the building has been converted into a PG Accommodation and that their address is not known. Therefore, the Petitioner adopted substituted service through paper publication on 23.09.2022 in Indian Express , English Edition and Kannada Prabha , Kannada Edition, and thus, service of notice through substituted mode is complete. Therefore, service of notice is complete on all the Respondents. 8. On perusal of records, it is seen that the Petitioners herein are the buyers of real estate units in the project namely VSPL Pinnacle situated in Bengaluru developed by R-1 Company, namely, M/s. Vikram Structures Private Limited. This project is developed by the Company in furtherance of a Joint Development Agreement dated 11.09.2013 executed between the Company and the Owners of the Land, namely, Mr. B.N. Narayanaswamy, his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the said building is constructed. Active connivance of the Company and its Directors and the Owners of the Land in perpetration of fraud is also apparent from the fact that the owners of the Land who were plaintiffs in the suit CS No. 3301 of 2019, despite being aware of the fraudulent activities of the Company and its Directors and restrain order passed by the Ld. Court, never brought such fact to the knowledge of the Buyers. The Owners knowing the facts that the Company is executing fraudulent Sale Deeds in violation of interim orders never took any action against the Company. The owners of the land to help the Company in defrauding the buyers withdrew the suit on 02.10.2020 leaving the units buyers completely unaware of frauds being committed upon them. The buyers of the units came to know about the injunction order of the Court only subsequently when the owner filed two suits against the Company, its Director and unit buyers including the Petitioners herein when they received summon of the Suit along with documents relied upon in the said Suit. In view of the irregularities listed above and the allegations, the Petitioners have sought direction for the investigation into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ful purpose, or that the company was formed for any fraudulent or unlawful purpose; or (ii) any person concerned in the formation of the company or the management of its affairs have in connection therewith been guilty of fraud, then, every officer of the company who is in default and the person or persons concerned in the formation of the company or the management of its affairs shall be punishable for fraud in the manner as provided in section 447. 11. The Seven Petitioners who filed the instant Petition are the Buyers in the Property, namely, VSPL Pinnacle . As per the Sale Deeds/Agreement to Sell of the Petitioners enclosed with the Petition, the following details are observed: Sl. No. Date of Execution Purchaser Sub Reg. Doc No. Sale Consideration (Rs.) Floor No. Area Sq. Ft. UDS Sq. Ft. 1. 27.11.2019 Mrs. Arthi Ravi Mr. Shailendra Ravi HSR-1-02804-2019-20 57,00,000 GF 1000 125 2. 21.08.2019 Mrs. Deepa Narsimha Nayak GNR-1-02119-2019-20 57,00,000 2 1000 250 3. 03.10.2019 Mrs. Meghana T.V. GNR-1-02871-2019-20 60,00,000 5 1000 250 4. 18.06.2020 Mr. M.N. Vijai HSR-1-01180-2019-20 60,00,000 6 1000 250 5. 13.12.2019 Mr. Ramesha A.V. HSR-1-02956-2019-20 27,29,245 6 500 125 6. 09.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o defraud the Buyers of this Property. It is alleged that the R-1 Company through its Directors, namely, Mr. Vikram Prabhakar, Mrs. Aishwarya G.B. and Mr. Manjunath Ravindra, the Owners of the Land and R-16: M/s. Innovent Spaces Pvt. Ltd. created a Lease Agreement showing the first two Parties as Lessors and R-16 as the Lessee. This document was made to create a fake impression of non-existent rental assurances with respect to the Property; luring the Buyers who were guided by this fake impression created. This document has duly been attached with the Petition. It is alleged that the so-called Lease Agreement was signed for a period of twenty years with a lock-in period of five years, but it was not for a real purpose, but merely to impress the Buyers regarding the fixed income likely to accrue to them. Further, R-1 Company made the Buyers enter into another similar Lease Agreement with R-17 entity i.e. M/s. Project Craft Solutions, only to give a false hope of the Property giving a regular rental income. It is also alleged that some of the Buyers were induced into buying some Units on the basis of the Agreement with R-16 and R-17, whereas, in reality, these Units sold to these Buy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that in view of the admission of the above Petition filed under Section 7 of the I B Code, 2016, there was also a moratorium imposed under Section 14 of the Code, and the Petitioner s claims have been rejected in the CIRP since the Petitioners have chosen to not to have relinquished their rights during the CIRP proceedings. Some of the explanations given in the reply filed by the R-1 does not have any relevance in so far as the Petition u/s 213 of the Companies Act, 2013 for investigation into the affairs of the Company is concerned. The RP has given a detailed explanation related to claim of refund by some of the stakeholders including the Petitioners herein, stating that since the Sale Deed has been registered and the Legal Title has been transferred to the Petitioners, they cannot seek refund of the purchase amount of the Property. However, this is not the matter at hand and no such claim of refund has been made in the Petition filed u/s 213 of the Companies Act, 2013. Therefore, the RP has given an explanation in the reply which is not relevant at all for the purposes of this Petition. As has been discussed in detail, there have been specific allegations about the irregularit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Adjudicating Authority related to the period before Corporate Insolvency Resolution Process . 38. It cannot be lost sight of that a Company in liquidation retains its existence and it is entitled to sue and be sued in its name, till it is dissolved in the manner known to law. Under Section 430 of the Companies Act, 2013 National Company Law Tribunal will have jurisdiction to deal with the disputes arising out of the Companies Act, 2013. 18. Moreover, the Appellant also stated that even in the case when the Company was undergoing CIRP also, investigation into the affairs of the Company by exercising powers under Section 213 of the Companies Act, 2013 was valid, for which, reliance was placed on the decision of Hon ble NCLAT in Mr. Lagadapati Ramesh Vs. Mrs. Ramanathan Bhuvaneshwari in Company Appeal (AT) (Insolvency) No. 574 of 2019 dated 20.09.2019. 19. Accordingly, it is held that investigation under Section 213 of the Companies Act, 2013 is possible in respect of the Company which is undergoing the process of liquidation. Therefore, by exercising powers under Section 213 of the Companies Act, 2013, we are of the considered opinion that the instant Petition deserves to be allowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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