TMI Blog2022 (4) TMI 1255X X X X Extracts X X X X X X X X Extracts X X X X ..... gh its Administrator or Resolution Professional only and none else. Any such subsequent ratification of the acts deeds of Authorised Officer Mr. Amit Kumar Dubey, does not made him as duly Authorised Officer, as he was also no more in existence due to lack of value valid power of attorney Mr. Vivek Jaigadkar. Had, the petition would have filed before the appointment of Resolution Professional Administrator, the situation would have been different and his acts could have ratified and proceedings would have been taken over by either of these financial creditors. In the absence of any such valid power of attorney, the authorized officer had no legal and valid right authority to file and pursue the present petition. Thus, it is established the ratification of the Power of Attorney/Authorisation Letter both Mr. Mr. Vivek Jaigadkar Mr. Amit Kumar Dubey respectively by the erstwhile Administrator, Dewan Housing Finance Corporation Limited and subsequently by M/s. Piramal Capital Housing Finance Ltd. being Successful Resultant Applicant cannot be held legally valid for the purpose of filing continuation of the present petition under Section 7 of the Code - the present petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... saction was actually a 'financial debt' under section 5(8) of code - petition dismissed. - Company Petition No. (IB)- 472 (ND)/2021 - - - Dated:- 19-4-2022 - Dharminder Singh, Member (J) And Sumita Purkayastha, Member (T) ORDER Dharminder Singh, Member (J) 1. Instant petition under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for brevity 'the Code') read with rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity 'the Rules') by Dewan Housing Finance Corporation Limited (Now-PCHFL) (here-in-after referred as the Petitioner) to trigger Corporate Insolvency Resolution Process against the respondent Company M/s. Nayati Healthcare Research NCR Private Limited (here-in-after referred as 'Corporate Debtor'). 2. As succinctly put, the facts of the present case are that the Petitioner Piramal Capital Housing Finance Limited has taken over the Dewan Housing and Finance Limited by virtue of order dated 07.06.2021 passed by NCLT, Mumbai Bench approving the Resolution Plan of Petitioner Piramal Capital Housing Finance Limited for the Dewan Housing and Finance Limited. The Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under Sub-section (3) (b) of Section 7 s the financial creditor has proposed the name of Mr. Chandra Prakash, for appointment as Interim Resolution Professional having registration number IBBI/IPA-002/IP-N00660/2018-19/12023 resident of 812, 8th Floor, Indra Prakash Building, Barakhamba Road, New Delhi-110001 with email - id cppumba2409@gmail.com. Mr. Chandra Prakash has agreed to accept the appointment as the interim resolution professional and has signed a communication in Form 2 in terms of Rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016. There is a declaration made by him that no disciplinary proceedings are pending against him in Insolvency and Bankruptcy Board of India or elsewhere. In addition, further necessary disclosures have been made by Mr. Chandra Prakash as per the requirement of the IBBI Regulations. Accordingly, it is seen that the requirement of Section 7(3)(b) of the Code has been satisfied. 5. The respondent corporate debtor filed the reply submitting that there were serious irregularities in the application that the Board Resolution dated 23.07.2017 and old Power of Attorney dated 31.10.2017 was executed by ers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution plan is duly approved by Adjudicating Authority, the claims provided in the resolution plan stand frozen qua the corporate debtor and its employees, members, creditors and other stake-holders and all such claims which are not a part of Resolution Plan shall stand extinguished. Thus, the Petitioner has already bypassed the transaction in the Resolution Plan. 8. The Petitioner in its Rejoinder reiterated the facts mentioned in the petition itself and relied upon the judgment of Innoventive Industries vs. ICICI Bank, reportable (2018) 1 SCC 407 and submitted that the Petitioner fulfils the twin condition of debt and default as laid down by Hon'ble Supreme Court. It is also submitted that the purpose of avoidance application is different from the reliefs sought by Petitioner in present application and since the default has been established, the application filed under Section 7 of code cannot be said to be a fraudulent or malicious initiation of proceedings merely because in some other proceedings erstwhile Administrator of DHFL has alleged fraud against the corporate debtor. It is further stated that the defects as pointed out by the corporate debtor have been cured b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the agent renouncing the business of the agency: or by the business of the agency being completed: or by either the principal or agent dying or becoming of unsound mind: or by the principal being adjudicated an insolvent under the provisions of any Act for the time being in force for the relief of insolvent debtors. 11. As discernible from Section 201 of Indian Contract Act, it is crystal clear that the moment the principal becomes insolvent, the attorney stands terminated and comes to an end. Hence, the Power of Attorney dated 31st October 2017 and in view of Resolution dated 23rd July 2017 stood terminated on triggering of CIR proceedings against the principal company i.e. M/s. DHFL vide order dated 03rd December 2019 also comes to end. Though, it is stated that on 05th August 2021, the Administrator Expert Member of the Monitoring Committee ratified the Power of Attorney issued by erstwhile Board of Financial Creditor and subsequently by M/s. Piramal Capital Housing Finance Ltd. being successful Resolution Petitioner. But it is settled principle of law that Power of Attorney is an authorization by the principal to its agent to do an act. A fortifier such an authorization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1, upheld the above said proposition laid down by Hon'ble NCALT in the matter of Palogix Infrastructure Private Limited (supra). Although, Ld. Counsel for the petitioner while relying on citation Rajendra Narottamdas Seth supra also stated that once the authorization has been given by the General Power of Attorney holder, then certainly the Authorized Officer is entitled to pursue the present matter on behalf of the Financial Creditor. But here in this matter, the situation is totally different as Financial Creditor i.e. Dewan Housing Finance Corporation Ltd. had already undergone insolvency proceedings and Administrator was stand appointed. The present petition u/s. 7 of Code, which was required to be filed by Administrator was filed by the erstwhile DHFL's Authorized Officer Shri Amit Kumar Dubey on the basis of Authorization Letter dated 05th August 2021, issued on account of Power of Attorney holder Mr. Vivek Jaigadkar dated 26.09.2017/31.10.2017. Both Authorization Letter dated 05th August 2021 Power of Attorney dated 26.09.2017/31.10.2017 were prior to the initiation of the insolvency proceeding against the Petitioner/financial creditor herein dated 03.12.2021. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .12.2019, CIRP proceedings were ordered to be initiated against the present Petitioner/Financial Creditor. Administrator was accordingly appointed on 24.12.2019. Simultaneously, CoC was constituted, who also ratified the appointment of the said Administrator. 17. Subsequently, NCLT-Mumbai, in CP (IB)-4258/C-Il/2019 vide its order dated 07.06.2021 accepted the Resolution Plan submitted by M/s. Piramal Capital Finance Ltd. Prior to that, on 02.02.2021, IA No. 257/ND/2021 titled as Administrator of Dewan Housing Finance Corporation Ltd. Vs. Kapil Wadhawan Ors. under Section 45, 60 (5) 66 of Code was filed in that company petition, wherein, the present Respondent-Corporate Debtor alongwith other were arrayed as party alleging that all the transactions qua those respondents were fraudulent collusive; which were based on the Forensic Audit Report of Grant Thornton dated 17.01.2021. The said interim application IA No. 257/ND/2021 is still pending and being consciously pursued by the present petitioner herein before NCLT, Mumbai. 18. Subsequent to the filing of said IA No. 257/ND/2021, the present petition IB-472/ND/2021 was filed on 26.08.2021 taking all together contradic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid two chunks of amounts were transferred, the petitioner itself claimed that the same were fraudulent collusive in nature. Further, while accepting the Resolution Plan submitted by M/s. Piramal Capital Finance Ltd. which is also subsidiary of M/s. Piramal Enterprises Ltd. i.e. Piramal Group, all the aforesaid transactions were factored as Rs. 1 which further fortifies the factum that the above said all transactions qua all the Respondent including the present respondent therein the said application, were not in the nature of actual loan, but a color was given it to that of financial debt and accordingly, the same was fraudulent collusive in nature. The relevant para of the Resolution Plan CoC decision is as under: III. As far as the claims of avoidance transactions, CoC has consciously decided that the money realised through these avoidance transactions would accrue to the members of the CoC at the same time they have also consciously decided after deliberations that the monies realised if any under Section 66 of IBC i.e. Fraudulent Transactions, they have ascribed the value of ₹ 1 and if any positive money recovery the would so to the Resolution Petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of India (Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17] has held: (SCC p. 64, para 42) 42. A perusal of the definition of financial creditor and financial debt makes it clear that a financial debt is a debt together with interest, if any, which is disbursed against the consideration for time value of money. It may further be money that is borrowed or raised in any of the manners prescribed in Section 5(8) or otherwise, as Section 5(8) is an inclusive definition. On the other hand, an operational debt would include a claim in respect of the provision of goods or services, including employment,. or a debt in respect of payment of dues arising under any law and payable to the Government or any local authority. (emphasis supplied) 46. In this context, it would be relevant to discuss the meaning of the terms disburse and time value of money used in the principal clause of Section 5(8) IBC. This Court has interpreted the term disbursal in Pioneer Urban Land Infrastructure Ltd. v. Union of India [Pioneer Urban Land Infrastructure Ltd. v. Union of India, (2019) 8 SCC 416 (2019) 4 SCC (Civ) 1] in the following terms: (SCC p. 511, paras 70-71) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the parties have entered into the transaction with a different or an ulterior motive. In other words, the real agreement between the parties is something other than advancing a financial debt. A useful elaboration of sham transactions can be found in the opinion of Diplock, L.J. in Snook v. London West Riding Investments Ltd. [Snook v. London West Riding Investments Ltd., (1967) 2 QB 786 : (1967) 2 WLR 1020 (CA)]: (QB p. 802) As regards the contention of the plaintiff that the transactions between himself, Auto Finance and the defendants were a sham, if is, I think, necessary to consider what, if any, legal concept is involved in the use of this popular and pejorative word. I apprehend that, if it has any meaning in law, it means acts done or documents executed by the parties to the sham which are intended by them to give to third parties or to the court the appearance of creating between the parties legal rights and obligations different from the actual legal rights and obligations (if any) which the parties intend to create. (emphasis supplied) 49. Diplock, L.J. also stated: (Snook case [Snook v. London West Riding Investments Ltd., (1967) 2 QB 786 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dealing in shares who would require ready money would lock up his assets like the property in dispute in a transaction which was such that the mortgage could not be redeemed before the expiry of the period of sixty years. The mortgage, therefore, was executed only with an ulterior purpose, it being wholly fictitious. (emphasis supplied) 51. The IBC has made provisions for identifying. annulling or disregarding avoidable transactions which distressed companies may have undertaken to hamper recovery of creditors in the event of the initiation of CIRP. Such avoidable transactions include: (i) preferential transactions under Section 43 IBC: (ii) undervalued transactions under Section 45(2) IBC: (iii) transactions defrauding creditors under Section 49 IBC: and (iv) extortionate transactions under Section 50 IBC. The IBC recognises that for the success of an insolvency regime, the real nature of the transactions has to be unearthed in order to prevent any person from taking undue benefit of its provisions to the detriment of the rights of legitimate creditors. G.3.4. Spade and AAA 56. Since the commercial arrangements between Spade and AAA, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Khosla, Harkirat S. Bedi, Karan Goel and Neeraj Jain (supra) are concerned. Apparently, in those matters, the proceedings for recovery of the debt were initiated by the Financial Creditor before the DRT and before the Civil Courts. The petitioner has taken similar stands and the pleadings were also consistent with that of the pleadings mentioned in the petition filed before NCLT. Thus, the citations are not at all helpful to the Petitioner. Whereas, in the matter of Neeraj Jain (supra), the fraud was committed against the Corporate Debtor and not against the Financial Creditor, therefore, the above said citations are also not helpful to the present petitioner. Simultaneously, the citations Damon Developers Pvt. Ltd., Prayag Polytech Pvt. Ltd., Jagmohan Bajaj, and IDBI Bank Ltd. Vs. JBF Petrochemicals Ltd., L T Infrastructure Finance Company Limited (supra) being based on totally different facts, accordingly, these are also not applicable to the present facts. 24. Ld. Counsel for the respondent has relied upon Moon Technologies Limited Administrator of DHFL (Supra), wherein it is clearly held that the amount of actual recovery that may be made in future is entirely irrelevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 12. A litigant can take different stands at different times but cannot take contradictory stands in the same case. A party cannot be permitted to approbate and reprobate on the same facts and take inconsistent shifting stands. The untenability of an inconsistent stand in the same case was considered in Amur Singh v. Union of India (Amur Singh v. Union of India, (2011) 7 SCC 69: (2011) 3 SCC (Civ) 5601, observing as follows: (SCC p. 86, para 50) 50. This Court wants to make it clear that an action at law is not a game of chess. A litigant who conies to court and invokes its writ jurisdiction must come with clean hands. He cannot prevaricate and take inconsistent positions. 13. A similar view was taken in Joint Action Committee of Air Line Pilots' Assn. of India v. DGCA [Joint Action Committee of Air Line Pilots' Assn. of India v. DGCA, (2011) 5 SCC 435], observing: (SCC p. 443, para 12) 12. The doctrine of election is based on the rule of estoppel-the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the species of estoppels in pairs (or equitable estoppel), which is a rule in equity.... T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and North Western Railway Co. [(1861-73) All ER Rep 646] the Court referred at All ER p. 651 F to Cornyn's Digest, wherein it has been stated: If a man once determines his election, it shall be determined forever. In the said case, the question was whether in a contract of fraud, whether the person on whom the fraud was practised had elected to avoid the contract or not. The Court held as long as such party made no election, it retained the right to determine it either way, subject to the fact that an innocent third party must not have acquired an interest in the property while the former party is deliberating. If a third party has acquired such an interest, the party who was deliberating will lose its right to rescind the contract. Once such party makes its election, it is bound to its election forever. (See All ER p. 652.) 49. In Kok Hoong v. Leong Cheong Kwong Mines Ltd. [1964 AC 993 : (1964) 2 WLR 150 : (1964) 1 All ER 300 (PC)] the Privy Council held that: (AC p. 1018) a litigant may be shown to have acted positively in the face of the court, making an election and procuring from it an order affecting others apart from himself. In such circumstance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 60(5), 66 of Code saying that the transaction to the Corporate Debtor as well as other companies were fraudulent collusive in nature. Thus, now, by virtue of this petition under section 7 of code, it cannot be allowed to say that the said transaction was valid being loan in nature. The petitioner cannot be allowed to blow hot cold by taking contradictory inconsistent stands with a malafide intention to take undue advantage to secure an order of initiation of CLR proceedings against the corporate debtor herein. The expression debt due would obviously refers to debts that are due payable under law and not the amount, which was disbursed fraudulently collusively with ulterior motive. Thus, an amount may not be due, if it is not payable in law or in fact and the moment it does not satisfy basic conclusion that a default has actually occurred, the petition cannot be admitted. The respondent clearly pointed and proved that there is no dispute qua the claimed amount of ₹ 187 crores, but and it was in fact not a 'financial debt'. POINT NO. IV (Relief): 29. In sequence of the above said discussion, this Tribunal is of affirm view that neither t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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