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M/s. Asset Advisory Services India Pvt. Ltd. Versus M/s. VSS Projects Pvt. Ltd.

2017 (10) TMI 517 - NATIONAL COMPANY LAW TRIBUNAL, HYDERABAD

Corporate Insolvency Resolution Process - Whether the present CP is maintainable since the Petitioner has already resorted proceedings for recovery of the debt in question - Held that:- It is not the case of the Petitioner that the Respondent is unable to pay debt or it is insolvent for the same. While demanding to pay the loan in question, the petitioner is filing cases as stated supra, to prevent the respondent to pay the debt, after selling flats in question and, it is also not accepting the .....

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se as mentioned above and thus, there cannot be any resolution of insolvency process. The present petition is filed for purpose other than the resolution of insolvency as mentioned in Section 65. Therefore, the present proceedings must be held to be a maliciousone and it is liable to be dismissed with cost. - It is to relevant to mention here that as per Section 63 of IBC, 2016, no civil court or authority has jurisdiction to entertain any suit or proceedings in respect of any matter on whic .....

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Srikanth, Advs. For The Respondent : S. Agasthya Sharma, Adv. ORDER Per : Rajeswara Rao Vittanala 1. This Company petition bearing CP bearing CP (IB) No. 96/7/HDB/2017 is filed by M/s. Asset Advisory Services India Pvt Ltd. Financial Creditor, u/s 7 of IBC, 2016 r/w Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, by seeking to initiate Corporate Insolvency Resolution Process under IBC against VSS Projects Pvt. Ltd. 2. Brief facts, leading to the filin .....

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erred to . (2) The Financial Creditor is engaged in the business of acting as financial advisors and consultants on all matters relating to assets, finance, investments, insurance, money markets, capital markets, fund arrangements etc., per its main object in the Memorandum of Association and Articles of Association. (3) M/s. V.S.S. Projects Pvt Ltd., (herein after referred to as Respondent/Corporate Debtor) is a private limited Company incorporated under the provisions of the Companies Act, 195 .....

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,000/- (Rupees Two Crore Fifty Lakhs Only) for the repayment of OTS (One Time Settlement) amount outstanding with M/s. DHFL (Dewan Housing Finance Limited) from whom the Corporate Debtor had availed project finance. The Financial Creditor had disbursed the amount as follows: Date Bank Pay Order No. Favouring Amount Rs. 31-03-2016 Oriental Bank of Commerce 479913 D.H.F.L. 2,50,00,000 (5) The Corporate Debtor executed a Promissory Note and issued a duly signed receipt acknowledging the receipt of .....

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inal Title Deeds and promised to repay the loan amount with ₹ 2/- simple interest and had requested to adjust the amount of ₹ 20,00,000/- (Rupees Twenty Lakhs Only) remitted on 28/6/2016 towards interest and had reassured that the loan shall be closed by the end of July, 2016. However, it failed to honour its commitment of repayment of the amounts even after 30/06/2016. (7) Further, the Corporate Debtor had issued cheques bearing Nos. 786493, 786494, 786495, 786496 dated 14.11.2016 a .....

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Debtor had alienated 3 Flats bearing Nos. 201, 203 and 712 illegally even though there is a charge in favour the Financial Creditor by virtue of an Equitable Mortgage by deposit of title deeds of the property. The Financial Creditor had initiated criminal proceedings for cheating and other offences against the Corporate Debtor for entering into such sale deed in utter violation of the understanding with the CCS, Hyderabad and the same was registered as Crime No. 259/2016. (9) In the above circu .....

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Two Crore Ninety Five Lakhs Only). (11) It is stated that there is a Financial Debt in existence within the meaning of Sec. 8(a) of the Code; M/s. Asset Advisory Services Pvt Ltd., is a Financial Creditor within the meaning of Sec. 7 of the Code; M/s. V.S.S. Projects Pvt Ltd., is a Corporate Debtor within in the meaning of Sec. 8; The Corporate Debtor had committed default as per Sec. 3, Sub-Section 12 of the Code for non-payment of financial debt . 3. The respondent/Corporate Debtor has filed .....

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btor is the absolute owner of 17 flats and 2 acres of land costing more than ₹ 10 crores. Each flat is costing around ₹ 40 lakhs as per latest market value Certificate. (2) By selling/adjusting 6 flats, entire amount paid by Financial Creditor under OTS facility to DHFL can be re-paid. Claim of Financial Creditor in COS No. 1 of 2017 is sought to be adjusted with 6 Flats, as pleaded in written statement-cum-counter claim filed in COS 1 of 2017 pending adjudication, before Hon'ble .....

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tor is neither Bankrupt nor can be depicted or declared as an Insolvent, since Corporate Debtor and its MD are owning properties worth more than ₹ 10 crores and amount payable to Financial Creditor is only ₹ 2.5 crores. (5) Corporate Debtor filed Counter- claim for an amount of ₹ 1.02 Crores by paying court fee, against Financial Creditor, on account of loss sustained by it due to illegal conduct and functioning of Financial Creditor. Such functioning resulted in causing immens .....

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and Finance Corporation Limited (D.H.F.L) towards OTS Payable by Corporate Debtor to DHFL; after receiving: - (i) 5 undated cheques of ₹ 50 lakhs each, from Corporate Debtor on 31/03/2016. (ii) Stamped receipt for ₹ 2.5 Crores from Corporate Debtor, on 30/03/2016. (iii) Demand promissory note for an amount of ₹ 2.5 Crores, in favour of Financial Creditor on 31/03/2016, and with (iv) An express condition and understanding between parties herein that the amount of ₹ 2.5 Cr .....

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ts on the pretext of busy schedule and lack of time to verify and sent email dated 25/4/2016 enclosing MOU for 20 flats with a request to execute MOU and create charge on 20 flats. Corporate Debtor did not agree to sign MOU, since the same would deprive Corporate Debtor to pay back OTS amount to Financial Creditor, apart from depriving Corporate Debtor to accommodate those persons, who helped M/S VSS PROJECTS (PVT) LTD., to complete its venture. (8) Later, on 09/05/2016, Financial Creditor hande .....

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l Creditor sent emails on 07/07/2016 with request to execute documents mentioned therein by projecting false version. (10) It is stated that Financial Creditor has suppressed and concealed above facts and emails exchanged between parties till 08/07/2016, particularly, those relating to MOU, Agreement of Sale confirms the ulterior motives of Financial Creditor to grab all 20 Flats (though only 17 flats are unsold Flats) pertaining to Corporate Debtor. (11) It is stated that it is highly improbabl .....

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equent Notification by RBI on the Real Estate Sector/Industry; thus resulting in downward trend of Real Estate Market. Corporate Debtor is also one of the worst victims of: - • Demonetization impact, on 08/11 /2016 • RBI Notification that no transactions beyond 2 Lakhs, & • Finally, the illegal conduct/Functioning coupled with avarice of Financial Creditor's Director whose conduct and functioning alone resulted in the present sad state of affairs and speculative litigation .....

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ncial Creditor, as submitted above and also as pleaded in WS-cum-Counter Claim. (14) It is stated that the petitioner has initiated criminal case vide FIR No. 259/2016 in CCS by fabricating false evidence, i.e. letter dated 1/11/2016, against Corporate Debtor, 3 flat owners who purchased 3 flats and also SBH that extended loan facility, apart from initiating proceedings U/S 138 NI Act and filing Commercial suit COS: 1/2017 before the commercial court; disentitled Financial Creditor for any relie .....

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entire property of Corporate Debtor to realize his ultimate goal of swallowing all the properties of Corporate Debtor costing around 10 crores for a mere debt of 2.5 crores. (16) It is stated that the functioning of Financial Creditor is detrimental to survival of Rule of Law and may not be entertained by this Honourable Tribunal in the interest of Justice. (17) It is stated that the petition is hopelessly premature to construe the Corporate Debtor either as insolvent or bankrupt and also to ini .....

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lleged default when 4 cheques dated 14/11/2016 got bounced on 18/11/2016 is also the ingenious creation and invention of Financial Creditor to dwell in speculative litigation before various forums with ulterior motives and evil intentions to grab 20 flats, though only 17 unsold flats are available for sale. (18) It is stated that version of Financial Creditor to the effect that There is a financial debt in existence within the meaning of section 8(a) of the code is untenable since Financial Cred .....

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default as per section 3(12) of the code as is evident from the above submission. M/s. VSS Projects Pvt. Ltd. is not a Corporate Debtor within the meaning of section 8. Even today, Corporate Debtor is prepared to deposit an amount of 2.5 crores before Competent civil court, where the case COS: 1/2017 is pending, in the event of allowing Corporate Debtor to sell some of the 17 unsold flats; which could not be sold due to the Status Quo Order. The said LA. is pending adjudication before the Hon .....

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ncial Creditor to grab the properties of Corporate Debtor by preventing him to sell the available 17 flats costing around 40 lakhs each and repay a meagre amount of ₹ 2.5 Crores. (20) He has relied upon the following decisions in support of his case: (a) Ram Dhan v. State of U.P. AIR 2012 SC 2513 -Head Note- B: Suppression material fact- Petition against rejection of application for discharge-Fact that petition to quash charge sheet filed by petitioner was dismissed-Not disclosed-SLP liabl .....

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lained conduct in making claim for larger extent in Plaint than that mentioned by Plaintiff in notice, in facts and circumstances of case, would disentitle Plaintiff to equitable relief of temporary injunction. (d) Sanjay Kaushish v. D.C. Kaushish AIR 1992 Delhi 118 Civil P.C. O-39, Rules 1 & 2, S. 151 of CPC-Relief of Injunction-Suppression of material Facts-Effect -Suit liable to be dismissed without going into merits. (Paras 9, 10, 11 & 12). (e) S.P. Chengalvaraya Naidu v. Jagannath A .....

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documents vital to litigation in order to gain advantage on other side- He would be guilty of playing fraud on court as well as on opposite party- Not entitled to discretionary relief of injunction. (Paras 12, 13, 14 & 15) (21) The Learned counsel, therefore, submit that ratio as decided in the above cases, are squarely applicable to the factual matrix of the instant case, wherein Corporate Debtor had deliberately withheld and suppressed material facts and documents, particularly e-mails. He .....

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g of the case, have further reiterated their contentions raised in their respective pleadings. 6. Shri T. Surya Satish, the Learned Counsel for the Petitioner has further submitted that it is not in dispute that the Financial Creditor had made available to the Corporate Debtor a short term loan of ₹ 2.50 crores for the repayment of OTS (One Time settlement) amount outstanding with M/s DHFL. Accordingly, the Corporate Debtor has also executed a Promissory Note and issued a duly signed recei .....

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eating and other offences against the Corporate Debtor and case was registered under case No. 259/2016. He also filed civil suit bearing CO Sl. No. 1/2017 and obtained status quo order. He has further submitted that the application is complete in all respects as law, and thus it is to be admitted, consequential moratorium has to be imposed and IRP to be appointed. 7. Shri S. Agasthya Sarma, the Learned Counsel for the Respondent, on the other hand, submit that the Petitioner/Financial Creditor i .....

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espondent has expressed its willingness to deposit an amount of ₹ 2.5 crores before civil court in case of COS No. 1/2017 provided that it is permitted to sell 17 unsold flats. However, the respondent is unable to pay its said debt due to status quo passed in the said case. As the petitioner fails to co-operate with respondent to sell the flats in question, it has stopped payment of cheques issued to the petitioner. Since the petitioner fails to perform its duties to sell the flats in ques .....

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orted proceedings for recovery of the debt in question; 2. Whether the Petitioner fulfils the eligibility criteria to file the present CP; 3. If so, what is the relief petitioner entitled for. 9. It is not in dispute that the Financial Creditor extended short loan of ₹ 2.5 crores to the Corporate Debtor, and in pursuant to that, a promissory note also was issued by the Corporate Debtor to repay on or before 30.06.2016 together with @ 24% p.a. payable in advance monthly instalments. However .....

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jected. The petitioner has admitted that documents relating to 17 flats are stated to be with them. When the respondent is resorting to sell flats in question, the Petitioner has filed a civil suit bearing COS No. 1/2017 by questioning sale of flats contrary to agreements and thus, obtained status-quo order in respect of scheduled properties. So the respondent is unable to dispose of flats and pay the debt. It is to be mentioned here that the said short term loan was extended to the respondent b .....

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ase under NI Act on 15.12.2016, and also filed a FIR No. 259/2016 on 06.12.2016 and filing suit bearing COS. No. 01 of 2017 in January, 2017 before Civil Court. In addition, the petitioner also got issued a public notice in Telugu Newspaper dated 2nd December, 2016 by warning the public not to deal any transactions with properties of VSS Projects Ltd. (respondent). 10. Insolvency Bankruptcy Code, 2016 is promulgated with the following objective(s) (a) An Act to consolidate and amend the laws rel .....

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of the IBC is to provide a remedy to the insolvent to save him from embarrassment, to save his assets from dismemberment and to provide an equitable distribution of the assets of the insolvent. The Hon'ble Supreme Court in the case of Paramjeet Singh Patheja v. ICDS Ltd. [2006 (11) SCALE 459, AIR 2007 SC 168/2006 (4) Arb LR 202 (SC)] held that The Presidency Towns Insolvency Act, 1909 is a statute weighed down with the grave consequence of 'civil death' for a person sought to be adj .....

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77; 2.50 corers. The business involved is to sell flats in question, and to repay debts, and it is no body's case that the respondent became insolvent. The petitioner, not being satisfied with filing of above cases, has again resorted to invoke provisions of IBC to misuse it further. The petitioner is not interested to resolve the issue in question by extending co-operation as required in disposing of Flats in question, on the contrary, preventing the respondent from selling Flats in questio .....

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ready been paid. 12. The Petitioner has registered FIR No. 259/2016 on 6.12.2016 under Sections 406, 420 of IPC read with 120(B) of IPC wherein the Petitioner has alleged criminal breach of trust and cheating, criminal misappropriation, dishonest intentions on the part of VSS Projects Limited (Respondents herein) and also selling flats mortgaged with the Petitioner. In fact, this issue arise out of the mortgaged loans etc., arising out of Company affairs. He has also initiated case under section .....

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Act, when the Petitioner admittedly knows that payments of all the cheques were stopped due to failure on the part of the Respondents. As stated supra, civil suit filed is also against same cause of action as raised herein. 13. The Respondent also filed a criminal complaint vide FIR No. 106/2017 on 10.4.2017 with PS Kachiguda under sections 384, 406, 420 IPC, 156(3) CrPC by making allegations against the Petitioner with regard to the cheques in question and also not returning the original title .....

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ces of the case, as explained above. Section 65(1) and (2) of IBC reads as under:- 65(1) If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, of liquidation, as the case may be, the adjudicating authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crores rupees. 65(2) If, any person initiates voluntary l .....

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: In la legal sense, any act done wilfully and purposely to the prejudice and injury of another, which is unlawful, is, as against that person, malicious . Steplien's History of the Criminal Law of England, reads as . . . . . whenever the words fraud or intent to defraud or fraudulently occur in the definition of a crime two elements at least are essential to the commission of the crime: namely, first, deceit or any intention to deceive or in some cases mere secrecy; and secondly, either act .....

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present case so as to see whether the said provisions is applicable to the present case or not. As per the above sections, a person, who initiates insolvency resolution process for any other purpose other than resolution of insolvency, the Adjudicating Authority can impose suitably penalty so as to prevent litigant from misusing provisions of IBC. 16. In the instant case, as stated detailed supra, it is not the case of the Petitioner that the Respondent is unable to pay debt or it is insolvent .....

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