TMI Blog2021 (8) TMI 1240X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2013, to intervene or not since the Respondent Counsels are making submissions on the maintainability of the Petition in view of the provisions of Section 14 and 238 of the IBC? - HELD THAT:- The argument advances by the Ld. Counsels for the Respondents that the Petitioners have no power under Section 242 has no bearing for the reasons that the provision is very clear which shows that in the event the Central Government is of the opinion that the affairs of the company are been conducted in the manner provided and to protect the public interest it may itself be applied to the petitioner for the order under this chapter. Thus provisions of section 241(2)(m) of the Act are independent and have wide import as evident from IL FS orders passed by this Bench and the Hon'ble NCLAT. The cover under moratorium and the same could not be instituted or proceeded with. This is not a proceedings against the Corporate Debtor but for the Corporate Debtor. We certainly agree that the contention that no suit or proceeding can be instituted against the Corporate Debtors. But here the efforts made by the Union of India is to secure or restore the assets back to the ultimate victims of fra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rseas; II. That the Respondent Nos. 2 to 6 be immediately directed to disclose on affidavit their moveable and immovable properties/assets, including bank accounts, owned by them in India or anywhere in the world; III. That the Central Depository Services Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) be directed that securities owned/held by the Respondent nos. 2 to 6 in any company/society be frozen, and be prohibited from being transferred or alienation and details thereof be shared with the Petitioner; IV. That the Central Board of Direct Taxes (CBDT) may be directed to disclose information about all assets of the Respondent nos. 2 to 6, in their knowledge or possession, for the purpose of freezing and restrain on alienation of such assets; V. That the Indian Banks Association (IBA) be directed facilitate disclosure of the details of the bank accounts, lockers owned by the Respondent Nos. 2 to 6 and such bank accounts and lockers also be frozen with immediate effect; VI. That the Petitioner may be permitted to write to the State Government(s) and the Union Territories to identify and disclose all details of immovable properties owned/held by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the case when it comes to secured loans wherein it is declared as ₹ 20,149.23 crores in the year 2014 and the same increased to ₹ 28,586.87 crores in the year 2019, showing a steep rise in the loan component. 5. Coming to the investment in the year 2014, the Company recorded ₹ 5,626.93 crores and the same is increased to ₹ 9,635.75 crores, showing a rise in the investment but according to the Petitioners, the amount so invested by the Company is, in fact, dead investment which ought not to have been made by the company in any prudent manner, in view of the accumulated/loans resulting into depletion of networth of the company. This is also reflected in the adjusted Profit and Loss Account wherein in 2014, it is shown as ₹ 3.04 crores and the same is shown as Rs. (-)5,347.41 crores in the year March, 2019, which indicates the company's performance as completely derailed and the final networth of the company has become negative. 6. It is also made to note that the operating income is shown as ₹ 18,967.60 crores in the year 2014 which has come down to just ₹ 906.60 crores in the year 2019. Copy of the Annual Accounts for 2016-17 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y transactions undertaken by the Respondent No. 1 in the review period which fall within any of the following categories: (i) Preferential transactions under Section 43 of the Code (ii) Undervalued transactions under Section 45 of the Code (iii) Extortionate credit transactions under Section 50 of the Code and (iv) Fraudulent transactions under Section 66 of the Code. 11. The entire table as contained above clearly shows that while the receivables amount was ₹ 2891.3 crores, the payable amount adjusted was at ₹ 1,209.25 crores. The Auditor stated that on inquiring with the Respondent No. 1 above settlements, ascertaining whether any approval was sought from the Joint Lender Forum and Board of Directors of Respondent No. 1, in reply it was stated the same have been recorded on approval from only Mr. Venugopal Dhoot, Respondent No. 2 12. The Auditor further noted that 46 out of 49 tabled entities as stated in the Audit report, the working for which related to settlement of receivables and payable are entities which are connected as group entities of the Corporate Debtor. The details of the 22 out of 46 entities have been set out by the Auditor in Exh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not undertaken during the 'ordinary course of business'. Further, the auditor too has not made any qualifying remarks in his report vis- -vis transactions mentioned in Table 1, which goes to show that the auditor's involvement in respect of purported fraud in Respondent Companies. 16. In the light of the evidences reviewed by the auditor, arguments held and observations of the transaction auditor, the Audit report concludes that the transactions mentioned in Table 1 have had an effect of putting such creditor entities connected/known to the Respondent No. 1(whose payable balances aggregating to ₹ 1,209.25 crores have been settled with receivables from other entities) in a beneficial position than they would have been in the event of distribution of assets being made in accordance with Section 53 of the Code. Accordingly, the Auditor has noted that the aforesaid transactions in Table 1 are classified under Section 43 of the Code as preferential transaction. 17. The conclusive findings of the Auditor, as detailed in para 2.8.1 of Audit Report states that settlement transactions of ₹ 1,209.25 crores as depicted in Table 1, have been classified under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es with the erstwhile management of the Respondent No. 1. The writing off of ₹ 931.45 breakup is tabulated hereunder. 22. Basing on the above observations made by the Auditor, the Petitioner states that Respondent No. 1 and other connected declared group entities have not come clean before this Bench which goes to show the prima facie that Respondents were directly involved in the objectionable transactions with regard to the affairs of the Company. This preferential and fraudulent transactions are the same with regard to the other companies as contained in the above cause title. We have also perused the pleadings made in the above said petition wherein the contentions raised by the parties are one and the same and the transaction audit report is also more or less point out fraudulent conduct of erstwhile management. There has been thorough leakages taken place which has got a recurring effect until this day. 23. This Bench is very cautiously making this statement and emphasising on the fact of the legal position that the transaction audit reports reveal for fraudulent conduct in the companies mentioned in the cause title and their affect felt till this date o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for an order under this chapter. 29. The use of words are being conducted , does not mean it does not cover the past acts. It is to be interpreted that the acts so mentioned in the above proviso also indicates past acts of mis-management, the present acts of mis-management and also to contain the future acts, especially when it comes to dealing with fraudulent transactions. In this present case, the company is still in operation under the control of RP and hence all the acts so mentioned are not just past continuous but also present perfect continuous. 30. Further it is argued that Section 14(1)(a) of IBC which clearly shows that the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law. 31. The cover under moratorium and the same could not be instituted or proceeded with. This is not a proceedings against the Corporate Debtor but for the Corporate Debtor. We certainly agree that the contention that no suit or proceeding can be instituted against the Corporate Debtors. But here the efforts made by the Union of India is to secure or restore the assets back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present in India and overseas; II. That the Respondents (except companies) are immediately directed to disclose on affidavit their moveable and immovable properties/assets, including bank accounts, owned by them in India or anywhere in the world; III. That the Central Depository Services Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) is directed that securities owned/held by the Respondents (except companies) in any company/society be frozen, and be prohibited from being transferred or alienation and details thereof be shared with the Petitioner; IV. That the Central Board of Direct Taxes (CBDT) is be directed to disclose information about all assets of the Respondents (except companies) in their knowledge or possession, for the purpose of freezing and restrain on alienation of such assets; V. That the Indian Banks Association (IBA) is directed facilitate disclosure of the details of the bank accounts, lockers owned by the Respondents (except companies) and such bank accounts and lockers also be frozen with immediate effect; VI. That the Petitioner is permitted to write to the State Government(s) and the Union Territories to identify and disclose al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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