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TMI Blog2024 (10) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... ng held on 15.05.2020 and report was shared with the present Appellants. There is no objection raised to the final report by the Appellants submitted to the CoC. The RP then filed the application under Sections 25(2)(j), 43, 45, 66 and 235A of the Code in which the details of the preferential, undervalued and fraudulent transactions were given under separate heads. The application had to be filed because of the aforesaid transactions the total admitted claim of Rs. 2351.97 Lakh of the creditors became unrecoverable. The RP also gave the summary of avoidance transactions in which preferential was of Rs.502.46 Lakh, undervalued was of Rs. 1721.19 Lakh and Fraudulent was of Rs. 2384.32 Lakh. The present Appellants, who are arrayed as Respondent No.1 and 2 in the application bearing 2445 of 2020, did not choose to appear at the first instance despite service but later on they were allowed to appear by the Court and also allowed to file their reply to the application but they did not choose to file the reply either and as a result thereof, their right to file reply after giving appropriate opportunities was closed and the said order remained unchallenged at the instance of the Responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 15.01.2020 Tarun Batra (Respondent No. 1) was appointed as Resolution Professional (RP) and his appointment was approved by the Adjudicating Authority on 24.01.2020. During the insolvency process, the total admitted claim was Rs. 2351.97 Lakhs including claim of the financial creditors of Rs. 2277.80 Lakh and claim of the Operational Creditor of Rs. 74.17 Lakhs. 3. The CoC in its second meeting held on 14.02.2020 appointed A.K.G Associates for carrying out the transaction audit for the period from 01.04.2017 to 04.12.2019 (CIRP Commencement date). The transaction auditor presented the final transaction audit report to the CoC in its 3rd meeting held on 15.05.2020 which was shared with the present applicants for their comments. Since, final transaction audit report dated 20.05.2020 reported a large number of irregularities in the conduct and management of the business/ affairs of the Corporate Debtor including transactions which qualify as preferential transactions, undervalued transactions and fraudulent transactions, therefore, the RP filed an application bearing 2445 of 2020 under Sections 25(2)(j), 43, 45, 66 and 235A of the Code. In the said application, the RP gave the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of total amount paid, payments of Rs. 2.86 crore will be covered under section 43 (for the period 04.12.2018-04.12.2019) and payment of Rs. 4.07 crore for the period 04.12.2017 to 04.12.2019. The said transactions with the are not done in ordinary course of business and considered transactions. as preferential. Copy of Ledger Account of the party is attached at Annexure A-9 Total Amount considered under Preferential Transaction = Rs. 408.40 Lakh G.G Enterprises It was observed by the Transaction Auditor that the Corporate Debtor has taken an unsecured loan of Rs. 3.00 lakh from the party on 04.10.2017. Later on 18.05.2018 the same has been repaid but on verification with Tax Audit report of FY 2018-19 the same was not shown under repayments of loans/ deposits. The said transactions with the are not done in ordinary course of business and considered as preferential transactions. Copy of Ledger Account of the party is attached at Annexure A-10 Total Amount considered under Preferential Transaction = Rs. 3.00 Lakh Hinglaj Enterprises It was observed that the CD has adjusted receivable balance of Rs. 14.40 lakh receivable from various parties, against the opening payable balance of Hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 45. Copy of Ledger Account of the party is attached at Annexure A-12 Total Amount considered under undervalue Transaction = Rs. 781.78 Lakh R.K. International The Corporate Debtor during the review period has made sales of 20234. 90 quintal of Rice at average sales rate of Rs. 787.37 per quintal amounting to Rs. 159.32 Lakh. The Corporate Debtor has booked loss of Rs. 744.12 Lakh by selling 20234.90.quintal of Rice. The cost value of stock was Rs. 4464.76 per quintal. The amount of undervalue transactions is Rs. 744.12 Lakh, without considering the profit element. The suspended director has purposely done these undervalue transactions to transfer the assets of the corporate debtor to beneficiary and to keep the assets out of the reach of the creditors. The bank transactions with this party are also made in a single month to adjust the balance. The enquiry letter issued by the Applicant /Resolution Professional are also returned undelivered due to non-existence of the party at address The said transactions with the party is not done in ordinary course of business and considered as undervalue transactions under section 45. Copy of Ledger Account of the party is attached at A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done these undervalue transactions to transfer the assets of the corporate debtor to beneficiary and to keep the assets out of the reach of the creditors. The said transactions with the party is not done in ordinary course of business and considered as undervalue transactions under section 45. Copy of Ledger Account of the party is attached at Annexure A-16. Total Amount considered under undervalue Transaction = Rs. 14.72 Lakh Panchdev Foods and Chemical Limited (related party It was observed by the Transaction Auditor, that during the month of November 2019 the suspended directors has sold its 4 vehicles / trucks to the related party. The said sales has been made below the fair market value as per the valuation available on public domain. The detail of vehicle sold is given below:- Truck -HR67B4972 170,000.00 1,412,138.00 Truck-HR67A2252 100,000.00 428,505.00 Truck-HR67B4897 140,000.00 941,425.00 Truck-HR67A2251 100,000.00 428,505.00 Total 510,000.00 3,210,573.00 Loss Booked 2700573.00 Its seems that its mere a books entry to exclude such assets from the reach of secured creditors. The suspended director has purposely done these undervalue transactions to transfer the assets of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.50 Lakh during the review period. The sales transactions are entered by the suspended directors without any movement of goods and only for purpose of inflating the sales also write off the non-existence stock from the books of corporate debtor. The suspended director has purposely done these fraudulent transactions with the intent to defraud the creditors. Copy of Ledger Account of the party is attached at Annexure A-19 Total Amount considered under fraudulent Transaction = Rs. 205.50 Lakh (total of sales transactions) East India Overseas The Suspended directors during the review period has made purchase of Rs. 106.61 Lakh during the review period. The amount adjusted in account is Rs. 106.61 Lakh without any bank transactions. The purchase transactions are entered by the suspended directors without any movement of goods and only for purpose of inflating the purchase and stock values in the books of corporate debtor. The suspended director has purposely done these fraudulent transactions with the intent to defraud the creditors. Copy of Ledger Account of the party is attached at Annexure A-20 Total Amount considered under fraudulent Transaction = Rs. 106.61 Lakh ( total of purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o It was observed by the Transaction Co Auditor that the suspended directors has made sales of Rs. 164.40 Lakh, but no transportation details were given on the invoices. The enquiry letter were issued by the applicant / resolution professional, but no such party was found on the registered or available address. It was also observed that the GSTN number of the said party was found cancelled and the date of cancellation was 01.06.2019. On verification of invoices it was observed that out of total sales, sales of Rs. 101.12 Lakh has been made with vehicle owned by Corporate Debtor as the time of sales executed. The suspended director has purposely done these fraudulent transactions with the intent to defraud the creditors. Copy of Ledger Account of the par ty is attached at Annexure A-12 Total Amount considered under fraudulent Transaction=Rs. 164.40 Lakh(total of sales transactions) R.K. International It was observed by the Transaction Auditor that the suspended directors has made sales of Rs. 159.32 Lakh, but no transportation details were given on the invoices. The enquiry letter were issued by the applicant / resolution professional, but no such party was found on the registered o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, these respondents are proceeded ex-pare. List on 27.10.2020. 7. In view of the aforesaid order, the present applicants, who are arrayed as Respondent No. 1 and 2, were proceeded against ex-parte. 8. On 23.11.2020 the following order was passed:- Mr. Rajeev Gupta, Learned Counsel states that he has been instructed to appear for the Respondent No. 1 and 2. Respondent No. 1 and 2 is already proceeded ex-parte and makes oral request that the said order be set aside and respondents no. 1 and 2 be allowed to file their defence. The ex-pare order against the Respondent No. 1 and 2 is set aside. Let the copy of application be served through email during the course of the day. Reply be filed within one week thereafter, with copy in advance to other side. List on 24.12.2020 9. In terms of the aforesaid order, the ex-parte against the present applicants (R1 and R2) was set aside and time was granted them to file reply. 10. On 24.12.2020 the following order was passed:- Learned Counsel for the Respondents No. 1 and 2 states that reply could not be filed in compliance of last order since one of the family members of the respondent had expired due to Covid-19 infection. Let reply be filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was allowed and directions were issued which we have been captured in the first para of this order. 18 . It is pertinent to mention that at the time of preliminary hearing on 08.08.2022, the direction issued in para 17(b) of the impugned order to initiate penal proceedings against the suspended directors and other parties was stayed. It is also pertinent to mention that the Appellant filed I.A. No. 474 of 2023 for bringing on record some additional records procured during the pendency of the matter. This application was contested by the Respondent by way of reply, however, on 11.07.2023 the following order was passed:- After arguing sometime, counsel for the Appellant has submitted that he does not want to press this application. Accordingly, this application is hereby dismissed as not pressed. 19 . Counsel for the Appellant has argued that the impugned order is non- speaking and arbitrary as the Appellants have not been given fair opportunity to present their case. It is also submitted that the transaction audit report was not made available to the Appellant and finally that the combined application under Sections 43, 45, 66 of the Code is not maintainable in view of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication has dealt with preferential transaction undertaken by the Corporate Debtor and undervalued transaction undertaken by the Corporate Debtor as well as fraudulent transaction in different heads i.e. i , ii and iii thus allegations and averments were separately made and filing of composite application does not lead to any infirmity in the Application. We are not persuaded to accept the submission of the Appellant that since the composite Application was filed it ought to have been rejected . 22. We have heard Counsel for the parties and perused the record with their able assistance. 23 . The facts are not in dispute. It is not in dispute that total claim admitted in the resolution plan was Rs. 2351.97 Lakhs including claim of the financial creditors of Rs. 2277.80 Lakh and claim of the Operational Creditor of Rs.74.17 Lakhs. It is also not in dispute that the CoC in its second meeting held on 14.02.2020 appointed AKG Associates for carrying out the transaction audit for the period from 01.04.2017 to 04.12.2019 (CIRP Commencement date) and it is not in dispute either that the transaction auditor presented their final report in the 3rd CoC meeting held on 15.05.2020 and report ..... X X X X Extracts X X X X X X X X Extracts X X X X
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