TMI Blog2022 (1) TMI 1241X X X X Extracts X X X X X X X X Extracts X X X X ..... be defrauded of the Corporate Debtor or second one for any fraudulent purpose. On consideration of averments and the reply of respondent Nos. 1 to 4 in terms of Section 66, then it is found that the respondent Nos. 1 to 4 have not explained any reason to sell their shares to a Company, which is own and managed by them and they have also not explained the reason, why the said Committed Care Kargo Limited again resold the shares to these respondents. If the respondent Nos. 1 to 4 claims that these transactions do not come within the purview of Section 66 of the IBC, 2016 then onus is upon them to establish that said transaction was not with intent to de-fraud the creditors. But the respondent Nos. 1 to 4 have failed to establish this, therefore, these shareholding transactions were made with intent to defraud the creditors of the corporate debtor comes under the purview of Section 66 of the IBC, 2016. On the basis of this bank statement, the respondent Nos. 1 to 4 had although tendered their resignation but still they were having their control over the management and finance of the Corporate Debtor and the resignation was tendered only with intent to de-fraud with the credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tanveer Oberoi, Adv. For Liquidator For the Respondent : PiyushLakhanpal, Adv. Anirban Bhattacharya, Adv. ORDER AS PER AVINASH K. SRIVASTAVA (MEMBER TECHNICAL) 1. The present Petition has been filed by the applicant under section 66 of the Insolvency and Bankruptcy code, 2016 for seeking directions be issued to the respondents to provide for and make good to the corporate debtor for the losses caused due to the respondent's indulgence in fraudulent transactions and refer to the matter to IBBI in view of the provisions under section 236 of the Insolvency and Bankruptcy code, 2016. 2. Brief facts of the case are as follows: i. The applicant was appointed as as Interim Resolution Professional on 26.11.2019 in (IB)-2414/ND/2019 dated, and which was communicated to him on 28.11.2019. ii. The Corporate Debtor is in the courier business and was earlier known as Committed Worldwide Express Pvt. Ltd. The corporate debtor changed their name of Stock flow Express Pvt. Ltd. on 26-07-2019. iii. Prior to Dec 2018, there were five directors in the company viz, 1. Mr. Nitin Bharal 2. Mr. Narendra Bisht 3. Mr. Rajeev Sharma 4. Mr. Yashpal Arora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporate debtor. However, the ex-directors/director have not been providing co-operation to complete the transaction audit. The transaction auditor has not been able to submit his report due to non-sharing of documents and information by the ex-directors/promoters. Therefore, no supporting report from the transaction auditor has been annexed. This report has been prepared on the basis of the IRP's own analysis of the data and information available. Due to non-co-operation from the ex-directors/director, the IRP has been able to list only a limited number of transactions under specific sections of the IBC 2016. xi. That after the commencement of the CIRP, the applicant met Mr. Nitin Bharal (ex-director/promoter) to understand about the corporate debtor. Mr. Shiv Chaturvedi, though a director, claims to not have much information of business with him. Sometime later IRP met Mr. Narendra Bisht (ex-director/promoter) to seek help for appointment of second director as certain MCA compliance were pending, which needed to be completed. Mr. Bisht informed that the promoters have sold their shareholding and they are no more the shareholders, but this fact was not disclosed by Mr. Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence it was not their responsibility to appoint the replacement director. However, when the IRP asked him with what authority, the four ex-directors were still signing bank cheques till the commencement of the CIRP, and why they were not giving information about the share sale transactions, there has not been any response from the four ex-directors. xiv. There has been another share sales transaction where the four promoters sold their 100% share-holding to a related concern Committed Cargo Care Ltd. on 20-10-2017. The four promoters are also the promoter/directors of Committed Care Cargo Ltd. xv. That on 31-03-2018, about five months later, Committed Cargo Care Ltd. sold a part of its share-holding in the corporate debtor, Stockflow Express Pvt. Ltd., back to these four promoter directors. That on query, the four promoters/ex directors of the corporate debtor failed to explain the objective of making these round-about share sale transaction between companies where they are common promoters/directors, which shows that the share-sale transactions has been carried on to defraud the creditors. Also, the ex-directors were in a hurry to get rid of their responsibilities (whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . xvii. The Corporate Debtor Stockflow Express Pvt. Ltd. (earlier called Committed Worldwide Express Pvt. Ltd.) was in the courier business. The Corporate debtor has a related concern by the name Committed Cargo Care Pvt. Ltd., which is into cargo business. Before the commencement of CIRP, both these entities operated in separate business lines which did not overlap. However, after the CIRP commencement, Committed Cargo Care Pvt. Ltd. has started operating in the courier business as well. Both these companies have common promoters. The COC members advised the IRP that since the COC members are operating in the same market, they have come to know that the promoters have started doing the courier business in the related entity and this would impact the receivable prospects of the corporate debtor-On query on this issue, one of the ex-director/promoter, Mr. Nitin Bharal informed that it is the right of related entity to pursue any business mentioned in the articles of the company. The CoC members informed the IRP that DHL could be one common customer and they could provide information if the related entity has commenced courier business. The IRP had written to the concerned person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d large amounts of credit notes, written off debts to cause harm to the interests of the creditors. The attached ledger statement for R.J. Logistics show 8 credit notes worth Rs. 70,000/- each issued together. This could be a cash transaction as the credit notes are not usually issued on account for a round off figure. xxiii. It is submitted that the above report has been compiled by the IRP with his best efforts in terms of forming an opinion and determining if the corporate debtor has been subjected to any transactions covered under Sections 43,45,50 or 66 of the IBC 2016. The ex-directors/promoters are not co-operating with the IRP to provide required information and documents. 3. The IRP in his affidavit dated 21.10.2020 submitted that: i. The Hon'ble Bench V. NCLT New Delhi had, vide its order dated 12-10-2020, directed the IRP to file a supplementary affidavit to submit supporting documents for banking transactions mentioned on page numbers 52 and 53 of the IA/2153/2020. ii. That on 12-10-2020, the IRP wrote to the three Banks (Yes Bank, ICICI Bank and Axis Bank) with the respective list of specific bank transactions from the list given on page 52 and 53 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ICI Bank account. This is later than 31-12-2018 when the Respondents 1-4 are claiming to have given up all control of the Corporate Debtor. The Respondent getting himself added as an authorised signatory at a later date does not support their reply to have given up control of the Corporate Debtor on 31-12-2018. ix. The ICICI Bank has further advised that for the online debit transactions during this period, the authorisation was provided to Mr. Narendra Bisht (R2), Mr. Yashpal Arora (R3) and Mr. Rajeev Sharma (R4). x. The directors named by the respondents R1-R4, in their reply, Mr. Sujeet Kumar Chaudhary (now deceased on 12-08-2019) and Mr. Shiv Kumar Chaturvedi, who are advised by the respondents R1-R4 to be holding control of the corporate debtor at that time, neither signed any of these cheques nor have been named by the bank as the cheque signing authorities or the online transactions authorising persons. xi. The respondents R1 to R4 have denied that they were operating the bank accounts of the Corporate Debtor after resigning as directors on 31-12-2018. The above information received from the Banks supports the IRP's observations in the application IA/2153/2020, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate its contention that the answering respondents have been issuing cheques of the Corporate Debtor, after the company was taken over by Mr. Sujeet Kumar Chaudhary and his associates/nominees. vi. That the another transaction of transfer of the shareholding, as presented by the IRP in its application is irrelevant for the purpose of the CIRP, as the same was between the transferors and transferees, in relation to their individual asset not the asset of the C.D. vii. That the bad debts amounts to debt which bad in law or cannot be collected in future. The IRP have not placed on record any documents to substantiate its contention regarding write-off of bad debts. viii. That there is no restriction over the answering respondent from doing any business. Starting of identical business does not come under any fraudulent transaction u/s. 66 of the IBC. ix. That the answering respondents had surrendered their authorization as signing authority in banking transactions even after selling their shareholding and not kept operating the bank accounts of the C.D. x. That the answering respondents are not aware or privity of transaction of Rs. 3 Lac cash payment by Mr. Jasoria, as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o transaction existed between DHL and the Corporate Debtor. iv. The answering respondent also referred the definition of transaction Section 3(33) of IBC and Regulation 4(f) of IBBI Regulations, 2016. v. On a combined reading of Section 3(33) of IBC and Regulation 4(f) of IBBI Regulations, 2016, the IRP can look into the transactions qua the Corporate debtor alone and not its associated company and much less seek information regarding the same and therefore the IRP's query to the answering Respondent and/or DHL was completely without jurisdiction. vi. Further, the reliefs as sought in the application under reply is no maintainable as against the answering Respondent, since she is neither a partner nor a director of the Corporate Debtor especially when admittedly, there exists no transaction between DHL and the Corporate Debtor. 7. The Respondent No. 9 in his reply dated 09.10.2020 denied the contentions made in the application and contended that: i. the answering respondent is proprietorship firm running the courier services at Agra, UP. The answering respondent firm had an oral and mutual understanding with the firm namely Committed Worldwide Express Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its name and started refuting the agreements and documents issued by the then Directors, which is totally illegal and untenable in the eyes of law. vii. the answering Respondent has never done or entered into any business or commercial transaction with M/s. Stockflow Express Pvt. Ltd., at any point of time after its constitution and particularly after 12.4.2019, much prior to the initiation of present proceedings by M/s. Argus Global Logistic Pvt. Ltd. against M/s. Stockflow Express Pvt. Ltd. viii. arraying the answering respondent as party respondent on the basis of alleged statement of current director of M/s. Stockflow Express Pvt. Ltd., to the effect that the No Objection Certificate dated 12.04.2019 is forged one and is totally illegal and untenable. ix. the answering respondent also referred the definition of transaction Section 3(33) of IBC and Regulation 4(f) of IBBI Regulations, 2016. On a combined reading of Section 3(33) of IBC and Regulation 4(f) of IBBI Regulations, 2016, the IRP can look into the transactions qua the Corporate debtor alone and not its associated company and much less seek information regarding the same and therefore the IRP's query to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Stockflow Express Pvt. Ltd., and it appears that the Directors of M/s. Committed Worldwide Express Pvt. Ltd., after change of Management, changed its name and started making baseless allegations for avoiding their liability and has not even update their ledgers, which is totally illegal and untenable in the eyes of law. vi. the answering Respondent herein has sent an email dated 21.3.2020 to Mr. Randhir Singh, representative of M/s. Committed Worldwide Express Pvt. Ltd. and demanded the outstanding amount of Rs. 6,59,800.24/- which was due and payable by them to the answering Respondent as its ledger. vii. the answering Respondent has received email dated 27.3.2020 from the Applicant IRP showing the alleged debt against the answering Respondent. The answering Respondent herein has replied the said email by sending an email on the same day and on 28.3.2020 whereby it has been made clear that nothing was/is due and payable by the answering Respondent to M/s. Committed Worldwide Express Pvt. Ltd. And the account details have already been sent to M/s. Committed Worldwide Express Pvt. Ltd. viii. the answering Respondents have never done or entered into any business or comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansfer of money from the two purchasers of shares. The supporting details submitted by the respondents are summarized as under: S. No. Name of Respondent Name of Purchaser Paid up ca share as on 31.03.2018 as per information available with RP (Rs.) Cheque details Cheque Amount (Rs.) Credit details 1 Nitin Bharat Ripu Sadan Tiwari 250000 No. 000008 dated 15.03.2019, IDFC Bank 50000 Deposit slip Dated 03.05.2019 2. Narendra Singh Bisht Abhay Kumar Mishra 250000 No. 000035 dated 15.03.2019 50000 Bank statement credited on 31.05.2019 3. Rajeev Sharma Ripu Sadan Tiwari 250000 No. 000008 dated 15.03.2019 50000 Deposit slip dated 31.05.2019, Bank Statement credited on 01.06.2019 4 Yashpal Arora ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to the reply filed by R5). The write-off of debts has been done with an intent to defraud creditors of the corporate debtor as defined in Section 66(1) of the IBC 2016. iii. Starting of identical business by Committed Cargo Care Pvt. Ltd. - This is an associated concern of the Corporate Debtor and the respondents are directors/promoters in this concern. The IRP has mentioned in his application that the respondents have started identical line of business with Respondent No. 8 here. The Respondents R1 to R4 in their replies have mentioned that there is no restriction upon them to do an identical line of business and that indulging in such activities does not come under Fraudulent activities under IBC 2016. It may be noted that there is no denial on part of the respondents that they are indulging in an identical line of business. The IRP has mentioned in his application that this could have been done with ulterior motives and would cause irreparable damage to the corporate debtor. There is a possibility that the respondents would influence the debtors of the corporate debtor and the debt recovery would get severely impacted thus causing damage to the prospects of the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to get this information from respondent No. 1 to respondent No. 4 only. vii. Respondent No. 7-The Respondent was a company secretary with the corporate debtor. The IRP sought necessary information from her as well and wrote to her a few times. However, she was not co-operating. Only after the application under Section 66 was filed and a copy served on her, she replied to the 1RP mentioning that she did not have the information and that she was introduced to the corporate debtor by Respondent No. 6 and that Respondent No. 6 had advised her that the information sought by the IRP would be provided by the corporate debtor and its directors and that it would be taken care of. It may be noted that the address of both the Respondent No. 6 and Respondent No. 7 are same. viii. Respondent No. 8-The Respondent number 8 is a large corporation and was a service supplier to the corporate debtor. In the memo of parties, the IRP has mentioned Ms. Simi Chopra as representing the organization DHL Express (India) Pvt. Ltd. The IRP has mentioned in his application that Respondent No. 8 has started an identical line of business with the associated concern of the corporate debtor. Before filing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier known as Committed Worldwide Express Pvt. Ltd. Therefore, there was no confusion created by the IRP as alleged by the Respondent 8 in their reply. The Respondent No. 8 is a multinational organization and claims to work in ethical ways. However, in this case, it has connived with the Respondents No. 1 to Respondent No. 4 to fraudulently recover their outstanding in return of future favors being granted to the associated concern of the corporate debtor. ix. It is submitted on behalf of the Applicant that the bad debts shown at page 14 of the application were written off, which were not in a difficult category and which were less than 6 months old. The receivable to the tune of Rs. 1,25,37,262/- were written off during the F.Y. 2018-19, when the company was already facing financial distress. The contention of the Respondents, more specifically R1 to R4 is the write offs were done in order to utilize tax benefits, however, the said respondents may be put to strict proof as to how they have utilized tax benefits. The Respondents i.e. R1 to R4 failed to provide any reasoning against such write off upon the query being raised by the Applicant. x. It is submitted on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action between the Corporate Debtor and DHL. vii. The Respondent No. 8 is neither a partner nor a director of the Corporate Debtor nor any person, who is knowingly a party to any fraudulent trading especially when admittedly, there exists no transaction between DHL and the Corporate Debtor. 11. Respondent No. 9 in its written submissions has stated almost same statement as stated in its reply save and except as follows: i. The No Objection Certificate was issued on 12.4.2019 by the then Director Mr. Sujeet Kumar Chaudhary, after arriving at a full and final settlement of account, much prior to commencement of the proceedings before this Tribunal. Mere perusal of allegations made in the application against the Respondent No. 9, it would be clear that the said allegations does not fall within the scope and ambit of Section 66 of the Code in a manner whatsoever. ii. It is an admitted position that no transaction ever existed between the Corporate Debtor and the Respondent No. 9 and there is no examination and determination of the allegations in terms of section 66 of the Code, 2016. It is submitted that the application filed by the Applicant does not even fulfill the basic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that the Corporate Debtor has written off these debts to de-fraud the creditors. He further contended that with intent to fraud the creditors even after the resignation these respondents No. 1 to 4 were operating the bank accounts of the Corporate Debtor. It is further contended that there are two debtors Vyke Logistics and Vyke International of Rs. 20,12,383/- and Rs. 22,20,651/- as per the books of Corporate Debtor but no objection was issued as informed by the Corporate Debtor after receiving Rs. 3 lakhs as a cash for full and final settlement. He further contended that similarly another debtor by the name of RJ Logistic Services LLP with Mr. Rohit Jasoria also owes Rs. 10,71,250/- to the Corporate Debtor but the said debt was also written off. 14. On the other hand, Ld. Counsel for the respondent Nos. 1 to 4 raised all the facts mentioned in their reply and submitted that the applicant has failed to establish that there was any fraudulent transaction. He further contended that transfer of the share is immovable property and transfer of share do not come within the purview of Section 66 of the IBC, 2016. He further submitted that the respondent Nos. 1 to 4 are ex-directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector or partner of the corporate debtor, as the case may be, shall be deemed to have exercised due diligence if such diligence was reasonably expected of a person carrying out the same Junctions as are carried out by such director or partner, as the case may be, in relation to the corporate debtor. 17. Now in terms of provision, we consider the averments made in the application, reply and written submission filed by the respective parties. It is admitted fact that the respondent Nos. 1 to 4 had tendered the resignation on 31.12.2018 and respondent No. 5 alongwith Mr. Sujit Kumar Chaudhary were appointed as directors on 27.12.2018. 18. On perusal of Annexure-A at page 23 of the application, we notice that as on 31.03.2018, the respondent Nos. 1 to 4 were the directors of Committed Care Kargo Limited and there is also shareholder as on 31.03.2019. The scanned copy of the Annexure A is reproduced below:- 19. And this fact has also not been denied by the respondent Nos. 1 to 4 that they are the directors in the Committed Care Kargo Limited. It is also not denied by the respondent Nos. 1 to 4 that they have sold their shares to Committed Care Kargo Limited and again the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bad debts written off were at Rs. 1,25,37,262/-. The summary is as under: Date/receivable category 31.03.2019 31.03.2018 31.03.2017 31.03.2016 Less than 6 months 47749407 12816088 More than 6 months 25632177 Total receivables 24470625 47749407 38448265 3457837 Bad debts write-off 12537262 636143 194857 Figures in INR The corporate debtor was in a hurry to write-off receivables Which are not yet into a difficult category of more than 6 months ageing. This indicates that the corporate debtor has written-off these debts to defraud the creditors. The respondents Mr. Nitin Bharal, Mr. Narendra Bisht, Mr. Rajeev Shurma and Mr. Yashpal Arora were promoter/directors at the time these amounts were written off. A list of receivables tot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the applicant, during this time (02-04-2019 till 19-10-2019) the authorised signatories were Mr. Nitin Bharal (R1). Mr. Narendra Singh Bisht (R2) and Mr. Rajeev Sharma (R4). Moreover Mr. Nitin Bharal (R1) was added as an authorised signatory on 23-01-2019 in the ICICI Bank account. This is later than 31-12-2018, when the Respondents 1-4 are claiming to have given up all control of the Corporate Debtor. The Respondent getting himself added as an authorised signatory at a later date does not support their reply to have given up control of the Corporate Debtor on 31-12-2018. 26. In view of the facts and reply of the concerned bank and documents shared by the concerned bank, we are unable to accept this contention of the respondent Nos. 1 to 4 that they were not operating the bank account of the corporate debtor. It is also because of this facts, as per the prevalent banking business procedure, the moment, the directors or signatory of the bank account have/had tendered their resignation, the Company is required to send the name of director and the signature of the present directors to the concerned bank for the purpose of operating the bank account, which is in the name of a C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the category of the fraudulent transactions. 28. In view of the discussion made above, we are of the considered view that the cash transactions and the written off debt made with respondent Nos. 9 and 10 comes under the category of fraudulent transaction and same was done during the tenure of Respondent No. 1 to 4 and even after their resignation, they were having financial control in the affairs of the corporate debtor, therefore they are liable for these transactions. So far respondent No. 5 is concerned, since he is paid director and appointed on 27.12.2018, therefore, he is not responsible for any act or omission made by or on behalf of the Corporate Debtor. Similarly, respondent Nos. 6, 7 and 8 are also not held liable under Section 66 of the IBC. 29. Therefore, we find and hold the respondent Nos. 1 to 4, the Suspended Board of Directors/Promoters of the Corporate Debtor have been carried on business with intent to de-fraud the creditors of the Corporate Debtor or with fraudulent purpose and in this way, they have written off the debt of respondent No. 9 10 and also settled the amount on the payment of Rs. 3 lakhs against the total debt of Rs. 42,33,304/-. Hence, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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