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TMI Blog2024 (9) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Nimesh , Mr. Ajitesh Kumar , Advocates For the Respondents : Mr. Akshay Goel , Harsh Jadon , Adv. for R5 Mr. Anshuj Dhingra , Kartik Sethi, Shubhamngda Singh , Muskan Bagga , Adv. For R1 JUDGEMENT NARESH SALECHA , MEMBER ( TECHNICAL ) 1. These three Appeals have been filed against the common Impugned Order dated 16.02.2023 passed by the National Company Law Tribunal, Mumbai Bench, Court-III (in short 'Adjudicating Authority') in IA No. 47 of 2021 in Company Petition being C.P. (IB) - 3753(MB)/2018, which was filed by Malharshanti Enterprises Limited ('Operational Creditor') against the CAN Enterprises Pvt. Ltd. ('Corporate Debtor'). 2. In Company Appeal (AT) (Ins.) No. 545 of 2023, Mr. Manish Jaju, Resolution Professional of the Corporate Debtor is the Appellant. The Respondents in this appeal are Malharshanti Enterprises Limited is the Corporate Debtor (Respondent No. 1), Naresh Sevantilal Shah (Respondent No. 2) and Charu Naresh Shah (Respondent No. 3) who are Suspended Directors of the Corporate Debtor. The Company Appeal bearing Company Appeal (AT) (Ins.) No. 545 of 2023 has been filed by the Mr. Manish Jaju who has challenged the Impugned Order and has sought the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case." 5. The third Company Appeal bearing Company Appeal (AT) (Ins.) No. 600 of 2023 has been filed by Naresh Sevantilal Shah and Charu Naresh Shah who are Suspended Directors of the Corporate Debtor against the Malharshanti Enterprises Limited who is the ('Operational Creditor') as Respondent No. 1, CAN Enterprises Pvt. Ltd. ('Corporate Debtor') as Respondent No. 2, Mr. Jitendrakumar Rambaran Yadav, Erstwhile Interim Resolution Professional of the Corporate Debtor as Respondent No. 3, Mr. Manish Jaju who is the Resolution Professional of the Corporate Debtor as Respondent No. 4 and Paton Construction Pvt. Ltd., the Financial Creditor as Respondent No. 5. The Applicants in this appeal have sought following reliefs:- "a. That this Hon'ble Tribunal be pleased to set aside the order dated 16th February, 2023 passed by the Adjudicating Authority, National Company Law Tribunal, Mumbai Bench, in IA No. 47 of 2021 in CP (IB)/ 3753 (MB)/2018. b. For Costs; c. For such further and other reliefs, as this Hon'ble Tribunal may deem fit and proper in the nature and circumstances of the case." 6. At this stage, from above three appeals we note that the reliefs sought in all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Operational Creditor. 11. In this background, we will look into now challenged Impugned Order dated 16.02.2023. The present Resolution Professional Mr. Manish Jaju rejected the claims of Operational Creditor in totality and also admitted the claims of one Unsecured Financial Creditor i.e., Paton Construction Pvt. Ltd. for Rs. 1,05,877/- and changed the Constitution of Committee of Creditor ('CoC'). It is observed that after initiation of CIRP, public announcement dated 22.02.2020 was issued by Erstwhile IRP and Operational Creditor filed its claim along with proof on 06.03.2020 and the same was admitted. 12. From the Impugned Order, we note that Mr. Manish Jaju was appointed as Resolution Professional by an order dated 09.06.2020 passed by Principal Bench of NCLT in Interlocutory Application No. 1007 of 2020 replacing Erstwhile IRP Mr. Jitendrakumar Rambaran Yadav. Malharshanti Enterprises Limited (Operational Creditor) on 02.07.2020 filed an Interlocutory Application bearing I.A. No. 1241 of 2020 before the Adjudicating Authority, inter-alia, challenging the composition of Paton Construction Pvt. Ltd. as Single Member of CoC. 13. Mr. Manish Jaju, Resolution Professional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Innovations Pvt. Ltd. vs Kirusa Software (P) Ltd. reported at (2017) 1 SCC OnLine SC 353 the Hon'ble Supreme Court held as to what are the facts to be examined by the Adjudicating Authority while examining an application under section 9 of I&B Code which is reproduced below : "33. The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as defined, may, on the occurrence of a default (i.e., on nonpayment of a debt, any part whereof has become due and payable and has not been repaid), deliver a demand notice of such unpaid operational debt or deliver the copy of an invoice demanding payment of such amount to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may be (Section 8(1)). Within a period of 10 days of the receipt of such demand notice or copy of invoice, the corporate debtor must bring to the notice of the operational creditor the existence of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before the receipt of such notice or invoice in relation to such dispute (Section 8(2)(a)). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n a single response was made by the Corporate Debtor raising such disputes. 32. The Contention of the Appellant that the relevant date for determining whether there was a pre-existing dispute was the date of second demand notice, i.e. 23rd August, 2018 and not the first demand notice dated 2nd December, 2017 as the first petition was dismissed by the Adjudicating Authority as the Petitioner Counsel had asked for withdrawal of the first petition due to incorrect claims made under first application, with a liberty to proceed against the Corporate Debtor with a correct claim as envisaged under I&B Code. The above Contention raised by the Appellant cannot be sustained. The Adjudicating Authority has rightly relied upon the ratio laid down by this Tribunal in the case of Dinesh Gupta vs. Hajura Singh Bhim Singh & another, Company Appeal (AT) (Insolvency) No. 99 of 2018 wherein is was held that: "6. On hearing the parties, as we find that there was no dispute in existence prior to the 1st demand notice issued under Section 8(1) of the I&B Code and the Corporate Debtor disputed the claim about quality only after issuance of 1st demand notice, therefore, after withdrawal of 1st appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een timely rectified within the appropriate time, so that the Municipal Corporation found it appropriate to issue the Occupation Certificate. 36. In the light of the above observations and the records placed before us. We are of the view that there was no dispute existing prior to the first demand notice and only disputes raised prior to the first demand notice are relevant to determine its pre-existence and disputes raised thereafter are totally irrelevant for the same. Also the arbitration was invoked after the first demand notice. Thus the Adjudicating Authority have rightly concluded that there was no dispute existing prior to the demand notice issued under section 8 of I&B Code. 37. Therefore, we are of the considered opinion that there is no reason for interference with the impugned order passed by the Adjudicating Authority. Hence Appeal is dismissed. No order as to costs." (Emphasis Supplied) 16. The Impugned Order passed by the Adjudicating Authority vide its earlier order dated 30.08.2021 had ordered for forensic audit of the books of account of the Corporate Debtor of 5 financial years preceding the date of CIRP and appointed Mr. Amarjit Chopra, past President of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r and they are not at all necessary parties to this application. 19. This Bench further observes that the Resolution Professional has miserably failed to understand that the above CIRP order was passed by the adjudicating authority after prima-facie satisfying about the existence of 'debt' and 'default' of more than Rs. 1,00,000/- as on the date of filing the Company Petition and he shall not reject such claim of the Operational Creditor in toto by ignoring the concurrent findings of the adjudicating authority and the appellate authority. 20. It is appropriate to mention here that the RP herein filed an application bearing I.A. No. 375/2021 which is also pending before this Bench for withdrawal of the CIRP order under Section 12(A) of the Code on the ground of purported settlement entered into by the Corporate Debtor with the sole COC Member, M/s Paton Construction Pvt. Ltd. who is an unsecured Financial Creditor from whom the Corporate Debtor alleged to have borrowed an amount of Rs. 1,58,077/- recently before passing CIRP order which is an ingenious idea of Respondent Nos. 2 and 3 to bring out the Corporate Debtor from the clutches of CIRP order which attained finality from a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,95,01,079/-) was entirely rejected, whereas a fresh unsecured financial debt claim, which were received after initiation of the CIRP, from Paton Construction Pvt. Ltd., was admitted in full and was also declared as "Sole CoC Member" and the claim by the Suspended Director of the Corporate Debtor of Rs. 1,77,24,370/- was also admitted in full. 22. It is the case of the Appellant that after examining the books of the Corporate Debtor it came to his notice that no dues were outstanding and payable to the Malharshanti Enterprises Limited (Operational Creditor). The Appellant further submitted that he requested for documentations from the Malharshanti Enterprises Limited to substantiate its claims but received reply raising frivolous issues "including unauthorised constitution of CoC" etc. 23. The Appellant further submitted that he received an e-mail dated 31.08.2020 from Arpit Shah and Co., Chartered Accountant, the Statutory Auditors of the Corporate Debtor who allegedly stated that no debt is due and payable to the Operational Creditor. We observe that the need for seeking such unilateral clarification from Chartered Accountant has not been explained by the Appellant. 24. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding. 30. The Respondent No. 1 submitted that the Adjudicating Authority correctly admitted his claims and ordered for CIRP against the Corporate Debtor vide order dated 27.01.2020 which was challenged by Suspended Director of the Corporate Debtor and this Appellate Tribunal vide order dated 19.01.2021 dismissed the appeal upholding the correctness of the CIRP vide order dated 27.01.2020 and rejecting all the issues raised by the Suspended Director. The Respondent No. 1 submitted that the suspended Board of Directors preferred a SLP against this Appellate Tribunal Order dated 19.01.2021 before the Hon'ble Supreme Court of India and the said SLP was withdrawn and therefore, under these circumstances, the CIRP Order dated 27.01.2020 admitting section 9 petition as well as this Appellate Tribunal's order dated 19.01.2021 attained finality. 31. The Respondent No. 1 submitted that in March, 2020, when the agenda for first CoC meeting was circulated, it came to the knowledge of Respondent No. 1 that one Unsecured Financial Creditor i.e. Paton Construction Pvt. Ltd. was sought to be inducted as a sole CoC Member on the basis of a paltry sum of Rs. 1 lakh which was lent to the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged Unsecured Financial Creditor as sole CoC member could pass a resolution to withdraw the CIRP against the Corporate Debtor and indeed this exactly happened. 37. The Respondent No. 1 submitted that in the third CoC meeting dated 07.12.2020, the Financial Creditor, sole CoC member contended that he does not wish to continue with the CIRP and wants to continue its business with the corporate debtor and therefore, the Resolution Professional filed an application for closure of CIRP through IA 375/2021 under section 12A of the Code. 38. The Respondent No. 1 stated that consequent upon rejection of his claim, the Respondent No. 1 moved an Application bearing no. 47/2021 before the Adjudicating Authority against the rejection of his claim by the Resolution Professional vide its Email dt. 02.12.2020 and the Adjudicating Authority after recording the detailed observations allowed the said application vide the Impugned Order dated 16.02.2023 thereby directing the Resolution Professional to admit the claims of the Operational Creditor. The Respondent No. 1 highlighted collusion amongst the Resolution Professional, the sole CoC member and suspended Board of Directors of the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no error in the Impugned Order and the appeal is without any merit and deserves to be set aside with exemplary cost. Findings 43. We note that the role of the Resolution Professional, the Appellant herein, has been defined in the Code, inter-alia, regarding collation of claims as against the adjudicator's role given to the liquidator qua the claims filed in the liquidation proceedings, whereas, in the present case the Appellant has gone ahead in deciding the claims and also decided to offset the claims by raising a counter claims against the Operational Creditor on his own. 44. We have also noted that the prayers made in the present appeal (all specific prayers noted earlier), nowhere the prayer has been made regarding expunging of adverse remarks contained in the Impugned Order against the Appellant, however, when the case was getting concluded, the Appellant submitted that he will be satisfied if only adverse remarks are expunged and submitted that the Appellant has made passing remarks in "facts in issues" in Para 8(a) for the same. 45. The Appellant has defended his action in rejecting the claims of the Operational Creditor on the basis that he did not get suffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l are dismissed as not entertained." (Emphasis Supplied) 49. In this detailed background, we wonder as on what basis the Resolution Professional dismissed the claims of the Operational Creditor altogether which has gone through the entire round of litigation from the Adjudicating Authority to this Appellate Tribunal to the Hon'ble Supreme Court of India. Prima-facie this is much beyond his role and scope. If such approach of Resolution Professional is to be accepted then the whole process of CIRP proceedings can get demolished. 50. It is further interesting to note that one Unsecured Financial Creditor, namely, Paton Construction Private Limited who is supposed to have given a loan of paltry sum of Rs. 1 Lakh knowing well that CIRP is being initiated against the Corporate Debtor, then original IRP is removed and the present Appellant is appointed as Resolution Professional, who in turn rejected the claims of Operational Creditor and accepted the claims of the Unsecured Financial Creditor and claims of promoter. This made the way for making Unsecured Financial Creditor of Rs. 1,05,877/- as a Sole Member of the CoC and ousting the Malharshanti Enterprises Limited the Operational ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... process of CIRP and to deny the admitted claim of the Operational Creditor. This is evident from fact that the Resolution Professional filed CP (IB) 3753/MB/C-IV/2018, as per direction of single Member of CoC for closure of CIRP under Section 12 A of the Code. The aforementioned circumstances point out the high handedness and the malafide intentions of the Appellant conjointly with suspended Directors of Corporate Debtor and the Unsecured Financial Creditor. 58. We note that although the Adjudicating Authority in Impugned Order dated 16.02.2023 in Para 22 has recorded that "the conduct of the Resolution Professional also need to be thoroughly investigated". However, the Adjudicating Authority did not give directions for the further course of action for the same or direction to the IBBI. Hence, this Appellate Tribunal is required to take this to logical conclusion as we are upholding the Impugned Order in toto. In this background, we direct the IBBI to look into the role of the Appellant in accordance with the law regarding conduct/ misconduct of the Appellant as the Resolution Professional and take further necessary action as deemed fit and warranted on the facts of the case and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lakh and therefore was within his right to be sole CoC Member with 100% voting rights. The Appellant defended the action taken by the CoC and assailed the Impugned Order which has gone beyond jurisdiction of the Adjudicating Authority in treating the Financial Creditor unjustly and unfairly. 64. Concluding his remarks the Appellant requested to set aside the Impugned Order. 65. Per contra, the Respondent No. 1 Malharshanti Enterprises Limited denied of the allegations of the Appellant labelling these as mischievous and misleading. The Respondent No. 1 emphasised that the Appellant has been inducted in the CoC only to frustrate the CIRP and to deny the claims of the Respondent No. 1 herein. 66. The Respondent No. 1 also refuted the claims of the Appellant that his claims of financial debt have been nullified in the Impugned Order. The Respondent No. 1 elaborated that in the Impugned Order, the Respondent No. 6 has been directed to accept the claim of the Respondent No. 1 and only mentioned regarding ingenious way of the financial debt but has not nullified the financial debt of the Appellant. 67. The Respondent No. 1 explained that the only reason that Appellant is here before t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant's claim as the sole CoC member. On 18.03.2020, the first CoC meeting was conducted wherein the erstwhile IRP admitted the claims of the Respondent no. 1 and also the Respondent no. 1 was apprised of the fact that Appellant had lent a sum of Rs 1 lakh to the Corporate Debtor on 06.09.2019. The erstwhile IRP also recorded in the meeting that the claim of the Respondent No. 1 was verified and admitted on the basis of the supporting documents provided by the Respondent No. 1. The Respondent No. 1 alleged that since the Appellant became the sole member of CoC, therefore without any reason, in the very same meeting on 18.03.2020, the CoC passed the resolution for change of IRP and Mr Manish Jaju, the Respondent No. 6 herein was appointed as Resolution professional. 71. The Respondent No. 1 assailed that change of IRP was sought to be done in a haphazard manner when suddenly on 08.06.2020, the Respondent No. 1 receives an email addressed by the appellant wherein the IRP was apprised that the application for change in the Resolution Professional under Section 22 of the Code has been listed for emergency hearing on the very next date i.e. 09.06.2020 before the Principal Bench of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant filed claims for Rs. 1,05,877/- which barely meets the threshold of minimum Rs. 1 Lakh prevalent at that time. 77. We put a direct query to the Appellant regarding nature of his business and whether he has been involved in giving such loans to other parties and particularly how many such loans were given to the Corporate Debtor prior to this loan. The Appellant submitted that he is in a construction business and working as Real Estate Developer and not in financial business but in given circumstances he decided to give Rs. 1 Lakh loan to the Corporate Debtor which was legal for him to do so. The Appellant did not give any details of loans given to other entities or the Corporate Debtor prior to this transaction. 78. We observe that such construction companies are normally always short of funds and keep raising the funds from the banks/ NBFC's and are not in business to give such loans. We wonder as to why the Corporate Debtor, whose net worth is stated to be more Rs. 7 Crores, still took loan of Rs. 1 Lakhs knowing very well that CIRP against the Corporate Debtor is likely to happen. We could not find any satisfactory response from the Appellant as well as the Ex-Promoters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditor and the CIRP could be stage- managed as per desires. In this context, we reiterate that the forensic auditor in its report had observed that loan agreement was prepared on stamp paper dated May 2019 of Rs 100 for purpose of affidavit only and not for the purpose of obtaining loan and stamp paper was even prior to the Board resolution. It has been brought to our notice that as per Maharashtra stamp Act, stamp duty of 0.2% of the amount agreed in the contract gets attracted if amount exceeds 10 lakhs which in the present case was Rs 50 lakhs, which obviously was not paid. 82. We take into consideration that the demand notice under section 8 of the Code was sent to the Corporate Debtor on 02.12.2017 by the Operational Creditor whereas the said loan agreement was entered on 20.08.2019 i.e. This sequence reveals the conduct and intentions of concerned parties. 83. After going through all the facts of the case and submissions made by the parties as well as also going through the contentions of Resolution Professional in appeal bearing Company Appeal (AT) (Ins.) No. 545 of 2023 (which we have discussed at length in our earlier decisions we do not find any error in the Impugned Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extended time. 91. The Appellant submitted that based on the MoU signed by both the parties, on 25.09.2015 the Respondent No 1 was entitled to receive only Rs. 5 Lakh in full and final settlement from the Corporate Debtor and assailed the conduct of the Respondent No. 1 who created false and record and fabricated documents in order to demand further amount from the Corporate Debtor. 92. The Appellant reiterated that there were pre-existing disputes and MoU was signed on 25.09.2015, thus the demand notice under Section 8 was illegal and the same was replied accordingly. 93. The Appellant also gave the background of the appeal made before this Appellate Tribunal which was dismissed by this Appellate Tribunal on 19.01.2021 and which was challenged before the Hon'ble Supreme Court of India which was finally dismissed as withdrawn. The Appellant submitted that appeal was withdrawn after getting liberty for other legal remedies and based on this liberty granted by the Hon'ble Supreme Court of India , the present appeal has been filed by the Appellant. 94. The Appellant submitted that the Corporate Debtor was in need of money and as such the Corporate Debtor took a loan of Rs. 1 La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The Appellant further submitted that the Respondent No. 1 fabricated document based on which certain payment was made by the Corporate Debtor to the Operational Creditor and referred to cube testing reports which are used to determine crushing strength of the concrete tubes utilised by the Corporate Debtor in the present project and even cube test reports were found to be fabricated. 102. The Appellant also assailed the Impugned Order which has ignored the several vital facts including that the debt was not due and there was no default. The Appellant also raised the issue regarding limitation which was not considered properly by the Adjudicating Authority. The Appellant submitted that mere judicial order regarding admission of Section 9 application does not tantamount to admission of claims which has to go due process of law and to be followed by the Resolution Professional in terms of the stipulated requirements. 103. The Appellant also assailed the finding of forensic auditor and relied upon by the Adjudicating Authority as contained in the Impugned Order. 104. The Appellant submitted that there are FIRs pending before the police and authorities filed vide FIR No. 99/2023 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Corporate Debtor and the Corporate Debtor got the payments from other agencies hence plea of fabricated cube testing report is only after thought at this stage to somehow mislead this Appellate Tribunal raising such frivolous issues regarding alleged fabrication and forgery. 112. The Respondent No. 1 reiterated the ploy of the Appellant in connivance that the Paton Constructions Pvt. Ltd. alleged Unsecured Financial Creditor for mere amount of Rs. 1,05,877/- and in connivance that the Resolution Professional Manish Jaju is deny the admitted claims of the Respondent No. 1 and to take out the Corporate Debtor from the clutches of CIRP. 113. Concluding his remarks the Respondent No. 1 requested this Appellate Tribunal to dismiss this Appeal with exemplary cost so that such incidence are not repeated in future. Findings 114. After going through arguments of all parties we note that the issues raised by the Appellant has already been dealt by the Adjudicating Authority and subsequently by this Appellate Tribunal vide order dated 09.01.2023. We also note that the Appellant challenged the same before the Hon'ble Supreme Court of India which was also dismissed as withdrawn. 115. We wo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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