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TMI Blog2019 (4) TMI 1730X X X X Extracts X X X X X X X X Extracts X X X X ..... ted, under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 with the following prayers: (a) to pass order to liquidate the Corporate Debtor. (b) to pass appropriate orders for appointment of liquidator for Corporate Debtor. (c) to grant leave to the Applicant to submit written consent to act as the liquidator for the purposes of liquidation of the Corporate Debtor, subject to finalization of terms and conditions of the appointment between the Applicant and the CoC. (d) Pending hearing and final disposal of this application, to pass order for continuation of the Applicant as the Resolution Professional of the Corporate Debtor. (e) to pass any other order in interest of justice which this Tribunal deems fit. 2. For the sake of brevity and convenience, it is mentioned herein that: 2.1 CP(IB) No. 53/2017 was filed by ICICI Bank, the Financial Creditor (Applicant), under Section 7 of the Code read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authorities) Rules, 2016 seeking initiation of Corporate Insolvency Resolution Process against ABG Shipyard Limited (hereinafter referred to as "Corporate Debtor" having registered office at Magdalla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmission of resolution plans. 4.1 Under the second bid process, the Applicant invited EoI from interested parties/prospective resolution applicants vide its newspaper advertisement on 18th April, 2018 with last date for submission of EoI as 19th April, 2018 and the last date for submission of Resolution Plan as 23rd April, 2018. 4.2 It is stated that pursuant to the advertisement inviting EoIs under the second bid process on 18th April, 2018, EoIs were received from LHG and Deccan Value Investors L.P. However, LHG was the sole resolution applicant pursuant to the second bid process and submitted its resolution plan under the second bid process on 23rd April, 2018. 4.3 In the meanwhile, the Resolution Applicant viz. Liberty House Group Pte. Ltd. filed an IA No. 139 of 2018 on 19th April, 2018 challenging the decision of the Applicant in rejecting the resolution plan submitted by the Resolution Applicant under the first bid process on the basis of ineligibility under Section 29A of the Code and seeking interim relief restraining the opening of the bid under the second bid process. 4.4 This Tribunal vide order dated 20.04.2018 directed the Applicant (RP) to maintain status quo as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o have submitted a resolution plan for ABG Shipyard Limited, the Corporate Debtor under the provisions of the Code, including Section 29A of the Code and to seek directions to set aside the impugned order dated 16.04.2018 of the RP of the Corporate Debtor ABG Shipyard under Section 29A of the Code. 5.1.1 The aforesaid IA has been adequately dealt with in above referred paragraphs and the said IA becomes infructuous in view of the order dated 18.02.2019 of this Tribunal declaring that Resolution Professional of ABG Shipyard can convene meeting of the CoC and submit application for liquidation before this Adjudicating Authority, in case no resolution plan(s) are in the offing. Accordingly, IA No. 139 of 2018 stands dismissed as being infructuous. IA 348 of 2017 5.2.1 The instant IA has been filed by the employees and the workmen of the Corporate Debtor for payment of their outstanding salaries, wages and other dues and regular monthly payments since 1st August, 2017 and removal of the Resolution Professional and appointment of an alternate suitable person as the Resolution Professional to act in place of the existing Resolution Professional Mr. Sundaresh Bhatt. 5.2.2 It is stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of workmen's dues. To that extent, specific order has been passed in IA No. 78 of 2018 in CP(IB) No. 53 of 2017 on 25.04.2018 with the directions to deposit the said amount of Rs. 2,75,00,000/- (Rupees Two Crores Seventy-Five Lakhs) with the Registry of the NCLT. In view of the above orders in IA No. 78 of 2018, IA No. 348 of 2017 stands disposed of. IA 141 of 2018 5.3.1 The instant application has been filed by the applicant (Original Respondent) through the Resolution professional under the provisions of Section 60(5) read with Sections 43, 45 and 66 of the Code inter alia, for appropriate orders and directions in relation to transactions that can be classified as preferential and/or undervalued transactions and/or fraudulent/wrongful trading carried out by the Respondent Company before the insolvency commencement date. 5.3.2 The Corporate Insolvency Resolution Process ("CIRP") of the Respondent No. 1 company commenced on 1st August, 2017 and as per the provisions of the Section 12 of the Code was to be completed within a period of 180 days from the date of admission of the application to initiate such process. Subsequently, by an order dated 12th January, 2018 in CP( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the said transaction, the Respondent Company had transferred an amount of Rs. 15,96,85,475/- vide various transactions between 26.10.2015 to 06.04.2017 to ABGRPL through its bank accounts maintained with ICICI Bank and Vijaya Bank. ABGRPL being a company involved in the business of land developers, builders, contracts etc., only earned revenue of Rs. 5.67 crores and having a negative net worth of Rs. 158.22 crores for the financial year 2013-14. Upon review of the amounts transacted by the Applicant, it was ascertained that the said aggregate amount of Rs. 15,96,85,475/- was transferred to ABGRPL by the Respondent Company in the form of ad hoc loans/advances. The purpose of the ad hoc loans/advances made by the Respondent Company in favour of ABGRPL are not transparent/clear and appear to be advanced with an intent to defraud the creditors of the Respondent company. It is apparent from the financial position of ABGRPL that the said transactions were not in the ordinary course of business and it appears that ABGRPL does not possess the required financial capability to repay the amounts transacted by the Respondent Company. (b) The Respondent Company in the course of business had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hoc loans/advances. The purpose of the ad hoc loans/advances made by the Respondent Company in favour of AIPL are not transparent/clear and appear to be advanced with an intent to defraud the creditors of the Respondent company. In view of the above, it appears that the said transaction is a preferential transaction under Section 43(2) of the Code with an intent to defraud the creditors and/or for fraudulent purpose under Section 66 of the Code. (d) The Respondent Company prior to the CIRP appears to have entered into a transaction for the benefit of a creditor i.e. Nor Crane & Winch Private Limited ("NCWPL") having a vendor code 210220 in the books of account of the Respondent Company. The said transaction does not appear to be in the ordinary course of business. Under the said transaction, the Applicant upon scrutiny of the books of account of the Respondent Company observed that the Respondent Company had advanced an amount of Rs. 97,18,00,000/- in March, 2013 to NCWPL. From further scrutiny of the books of account of the Respondent Company, the Applicant could not ascertain the nature of transaction recorded against the account of NCWPL in the books of account of the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssets of the Corporate Debtor as it may deem fit. sub-section (2) of Section 66 states that if before the insolvency commencement date, a Director or partner know or sought to have known that there was no reasonable prospect of avoiding the commencement of Corporate Insolvency Resolution Process (CIRP) in respect of the Corporate Debtor; and such Director or partner did not exercise due diligence in minimizing the potential loss to the creditors of the Corporate Debtor, such director shall be liable to make such contribution to the assets of the Corporate Debtor. 5.3.7 We, the Adjudicating Authority, have gone through the each and every transaction submitted by the Resolution Professional, and after elaborate discussions, we have decided that impugned transactions mentioned in Para 7(a), (c) and (d) are preferential transactions as defined in the sub-section 2(a) of Section 43 of the IBC as these transactions have been executed within the look back period of two years before the commencement of Insolvency proceeding and are therefore covered under section 43(4)(a). However, the transactions mentioned in Para 7(b) and (e) are not preferential transactions as these transactions have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Seven Pte Ltd. ("Varada") through its bank account maintained with Royal Bank of Scotland. It is not clear whether such transactions have been carried to service offshore loans availed by group companies of the Respondent Company. Further, upon perusal of the Special Audit Report of M/s. Desai Saksena & Associates, it is inferred that such loans to the extent of Rs. 285,76,00,000/- were used towards payment of novation shipping contracts. It is also stated that Annual Report of the Respondent Company for the financial year 2015-16 clearly states that the said loans and advances were provided interest free. Therefore, the said transactions do not appear to be in the ordinary course of business. (b) The Respondent Company prior to the CIRP between the period of September, 2015 and March, 2016 the Respondent Company had transferred an amount of Rs. 199,66,25,200/- and an amount of Rs. 125,70,88,435/- was transferred prior to the period of April, 2015 through its various bank accounts in the form of loans and advances to Banal Investments and Trading Private Limited ("Banal"). Further, it is stated that Banal being a company engaged in the business of an investment company to purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Seventy-Three Lakh Eighty-Three Thousand Eight Hundred and Eighteen Only) appropriated by the Respondent Bank in violation of the order passed by this Tribunal on 01.08.2017 under Section 14 of the IBC. 5.5.2 It is stated by the Applicant that before passing of the aforesaid order by this Tribunal, Company, the Corporate Debtor, had maintained a fixed deposit of Rs. 9,73,83,818/- towards margin money with the Respondent Bank for various Non-Fund Based facilities sanctioned and availed by the Company, the Corporate Debtor, the details of the same are given hereunder: 1. FD No. 29100300001777 for Rs. 9,29,31,603/- 2. FD No. 29100300001820 for Rs. 43,51,081/- 3. FD No. 29100300001821 for Rs. 1,01,134/- Total for Rs. 9,73,83,818/- 5.5.3 On enquiry by the RP with the Respondent bank about the status of the aforesaid FDs, it was stated by the Respondent Bank vide their email dated 19.07.2018 that the aforesaid FDs were terminated and appropriated by the Bank on 02.08.2017 towards loan liablity. 5.5.4 It is stated by the Applicant that Respondent Bank was aware of the proceedings initiated by the ICICI Bank, the Financial Creditor against the Company, the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as fraudulent/wrongful trading carried out by the Respondent Company, the Corporate Debtor and the transactions to defraud the creditors before the insolvency commencement date. 5.6.1 It is stated by the Applicant that upon review of the books and business of the Respondent Company, the Applicant has found that certain transactions appear to have been carried as fraudulent transactions, not in the ordinary course of business which may be covered under Section 66 of the Code. The details of the fraudulent transactions are listed herein below: (a) The Respondent Company prior to the CIRP appears to have entered into a fraudulent transaction under Section 66 of the Code with ABG Shipyard Singapore Pte. Limited (hereinafter referred to as ("ASSPL") being a wholly owned subsidiary of the Respondent Company, incorporated on 8th February, 2010 in Singapore. (b) The Respondent Company in 2012 had invested in ASSPL by way of 42,97,100 1% redeemable preference shares of USD 1/- each at a premium of USD 9/- each amounting to USD 42,971,000/-. Further, the Respondent Company had also provided loans and advances to ASSPL amounting to USD 24,032,329/-. Accordingly, the total amount investe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mittee meeting held on 29th July, 2015 the Respondent Company was directed to obtain a certificate from a concurrent auditor regarding corresponding liabilities, in order to deliberate upon a decision for waiver. However, the said certificate from a concurrent auditor was not obtained by the Respondent Company. (f) As per the financial statements of the Respondent Company as on 31st March, 2017 the entire outstanding liability by way of investment in preference shares and loans and advances in ASSPL amounts to USD 66,153,329/- which is fully recoverable by way of liquidation of the investment. 5.6.2 The Applicant states that in view of the aforesaid findings, the Respondent Company had invested/given loans and advances to ASSPL, its wholly owned subsidiary and is entitled to recover an amount of USD 66,153,329/-. The aforesaid investments were to be recovered by the Respondent Company as recorded in the MRA and minutes of the meeting of the monitoring committee. However, the Respondent Company till date has failed to liquidate the investment and recover its money despite repeated assurances given to the monitoring committee and no reasonable steps have been taken by the erstwhil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled under Section 33(2) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as "the Code") by the Resolution Professional (hereinafter referred to as "RP") Mr. Sundaresh Bhatt, in respect of the Corporate Debtor Company, viz., M/s. ABG Shipyard Limited. 7.1 We have examined the merits of the present application by perusing the documents annexed therewith and also in the light of the aforesaid IAs. As per record, it is undisputed position in the present matter that this Adjudicating Authority, vide its order dated 01.08.2017, admitted the main Company Petition (bearing No. CP (IB) No.53/NCLT/AHM/2017 at the instance of Financial Creditor ICICI Bank. 7.2 Pursuant to the above stated admission order passed by this Adjudicating Authority, a Corporate Insolvency Resolution Process (hereinafter referred to as "CIRP") was commenced in respect of the Corporate Debtor Company. Further, the CoC was constituted by the then Interim Resolution Professional (hereinafter referred to as "IRP") and later on he was reappointed to act as Resolution Professional in order to complete the CIRP. 7.3 The Applicant in support of the present application has annexed copy of the order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of the committee of creditors approved by not less than sixty-six per cent of the voting share to liquidate the corporate debtor, the Adjudicating Authority shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (3) Where the resolution plan approved by the Adjudicating Authority is contravened by the concerned corporate debtor, any person other than the corporate debtor, whose interests are prejudicially affected by such contravention, may make an application to the Adjudicating Authority for a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (4) On receipt of an application under sub-section (3), if the Adjudicating Authority determines that the corporate debtor has contravened the provisions of the resolution plan, it shall pass a liquidation order as referred to in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1). (5) Subject to section 52, when a liquidation order has been passed, no suit or other legal proceeding shall be instituted by or against the corporate debtor: Provided that a suit or other legal proceeding may be instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 33(2) of the Code, with following observation/directions: i. That the Resolution Professional Mr. Sundaresh Bhatt appointed for the Corporate Insolvency Resolution Process under Chapter II of the Code shall act as the Liquidator for the purpose of Liquidation in pursuant to Section 34(1) of the Insolvency and Bankruptcy Code, 2016 as approved by the CoC in their 22nd Meeting held on 01.03.2019 and his fees shall be as per the Schedule as contained in the IBC, 2016. ii. All the powers of the Board of Directors, Key Managerial Personnel and the Directors of the Corporate Debtor Company, as the case may be, shall cease to have effect and shall be vested in the Liquidator pursuant to Section 34(2) of the Insolvency and Bankruptcy Code, 2016. iii. That the personnel of the Corporate Debtor Company shall extend all assistance and co-operation to the Liquidator as may be required by him in managing the affairs of the Corporate Debtor Company. iv. Issue a public announcement stating that the Corporate Debtor Company is in liquidation. v. The Liquidator shall discharge his functions pursuant to the powers and duties under Section 35 and other ..... X X X X Extracts X X X X X X X X Extracts X X X X
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