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TMI Blog2022 (6) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... (Resolution Professional) under section 60(5) and section 25(2)(j) of the Insolvency and Bankruptcy Code, 2016, read with Rule 11 of the National Company Law Tribunal Rule, 2016, seeking the following reliefs from this Adjudicating Authority: a. "For the combined and cumulative effect of all aforesaid and to protect the assets of the Corporate Debtor from being parted with by the holding company, this Adjudicating Authority may graciously be pleased to impose the vicarious liability of respondents and to pierce the corporate veil by disregarding the false description of corporate debtor created by the holding company. Respondents be held liable to discharge liabilities of the subsidiary/corporate debtor along with assets of all be held as merged or consolidated or intricately intertwined. b. pleased to declare all the aforesaid vulnerable transactions including illegal inter-se sale of shares of the corporate debtor among respondents by the holding company as preferential, undervalued, fraudulent, non-est and void and ab intio. c. Directions be passed for forensic audit of the holding and subsidiary company so that the notion of reciprocity between benefit and burden can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... guarantor and borrower is co-extensive and consolidated liability. It is submitted that Respondent No. 4 and 5 by collusive letter dated 7th February, 2020, clearly refused to disclose anything or to cooperate with the RP. The total claim received from creditors is Rs.10.70 Crore i.e Financial Creditor consisting of Indian Bank Rs.0.74 Crore and Operational Creditors totalling Rs.9.96 Crore consisting of Star India Pvt. Ltd. i.e. Rs.5.21 crore, Soni Pictures Networks India Private Limited is Rs.4.65 Crore, ESIC Rs.0.09 Crore. It is submitted that assets of the Corporate Debtor for the period 01/04/2016 to 31/03/2017 as per MCA Records is Rs.10.01 crores. 6. According to the applicant, Section 25 of the Code casts a duty upon the RP to file avoidance application in accordance with chapter III of the Code. Section 66 of the Code casts a duty to file an application in case he finds a fraudulent and wrongful transaction and Section 20 (1) of the Code mandates and requires the RP to make every endeavour to protect and preserve the value of the property of the Corporate Debtor. 7. On this application being filed, the applicant has sought to refer to the order of admission passed in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Regulations, 2016, the Resolution Professional shall act as the Chairperson of the meeting of the Committee of Creditors. Accordingly, Mr. Kuldeep Verma, being the RP chaired the Meeting by welcoming all present. Item No.3 (a)...... (b) Hon'ble NCLT, Kolkata Bench order dated 24.02.2020 With the permission of creditors present in the meeting, RP read the Hon'ble NCLT, Kolkata Bench order dated 24.02.2020 which reproduces as below: " Ld. Counsel for the RP appears. Third Progress Report is filed. It is taken on record. Heard Ld. Counsel for the RP. Issue notice to the directors of the Corporate Debtor for appearance before this Bench. Our order has NOT been complied with by them. So issue notice under Section 425 of the Companies Act for non-compliance of directions of this Tribunal. RP to serve notice and file affidavit of service. Matter to come up next on 17.04.2020". Actions /Steps taken by the RP vide Hon'ble NCLT order dated 24.02.2020 Pursuance to directions of Hon'ble NCLT vide order dated 24.02.2020, RP served notice under section 425 of the Companies Act for non compliance to all directors of AMBCL through speed post on 04.03.2020. The copy of the noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the IBC. XI. Sale of shares of corporate debtor was done by holding company at a distress value without making a public offer to overcome impediment of IBC and that too of the shares of corporate debtor having a non- disposal undertaking with the lender Allahabad Bank. XII. Mr.Dhatt also opined that complaint can be made to ED for violation of terms and conditions of sanction letter of AB based on Share Purchaser Agreement dated 29.03.2019. XIII. SPNIPL is of the opinion that transfer of Promoters shares without the consent of Allahabad Bank is a clear cut violation of terms and conditions of AB loan sanction letter. XIV. The COC and all creditors present were of unanimous view that the share purchase agreement dated 29.03.2019 executed between Induslnd Media & Communication Limited and Mr. Rajendra Prabhakar Padte is void ab initio as it does not have prior consent of Allahabad Bank. XV. In view of the present circumstances and facts as discussed above, the COC member refused to record any change in ownership of AMBCL as required under section 28(1)(d) of the IBC, 2016. XVI. AB mentioned that the corporate debtor is under corporate insolvency resolution process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BCL, then what action Allahabad Bank has taken so far. You are requested to revert by end of day 20.02.2020. Kind regards, Kuldeep Verma Resolution Professional" 13. The applicant has further placed on record a letter dated 28th December, 2018 written by IMCL to Registrar of Companies, Kolkata as under:- Sub: Annual General Meeting of Advanced Multisystem Broadband Communications Ltd. CIN No. U64202WB2000PLC091088 Dear Sir, This is to bring to your kind notice that we, Induslnd Media & Communications Limited (IMCL) through a Shareholders Agreement dated May 18,2012 had invested in a Company Advanced Multisystem Broadband Communications Limited (AMBC), a company having its registered office at Chinsurah, West Bengal and engaged in the business of providing Cable TV services to the subscribers in West Bengal. IMCL holds 59.61% of the paid up and issued share capital in AMBC and the balance 40.39% share capital is held by the operating shareholders (Local cable Operators) in and around the district of Hoogly,West Bengal. The day to day running of the business operations of the Company was entrusted in the hands of the local directors namely Mr. Santimoy Ghosh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Signatory". 14. The main thrust of the applicant in his arguments is that the respondents have not provided any documents and have not cooperated with the RP, and they have entered into vulnerable transactions like inter-se sale of shares of the CD amongst respondents, as preferential, undervalued and fraudulent, and that forensic audit of the so called holding company and subsidiary company be directed to be held. The applicant, however, has stated that there is no other asset of the CD, except the shares which have been transferred by respondent no.1. 15. In reply to the arguments of the RP, it is submitted by the respondents that the application is not maintainable. It is submitted that the RP has complained about the sale of the shares held by Respondent No.1 in the Corporate Debtor. It is submitted that there cannot be any restriction with regard to sale of shares held by R-1 in the Corporate Debtor because shares are not the property of the Corporate Debtor and therefore there is no question of transfer of any property of the Corporate Debtor as undervalued or in a preferential manner. It is submitted that the respondents were never promoters of the Corporate Debtor. Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleted and eroded the investment made by R-1 in the corporate debtor due to the same, respondent no.1 was constrained to sell its shares held in the Corporate Debtor. Respondent No.1 has also filed a complaint before the RoC inter alia stating the illegalities committed by promoters and directors of the Corporate Debtor and the nominee directors in the corporate debtor have also resigned on February 19, 2019. It is submitted that the petition is not maintainable as against Respondent Nos. 1,2,3 and 6 as there has been no illegal or fraudulent transaction done by the said respondent. 19.During the course of arguments, Ld. Counsel for the applicant /RP submitted that IA No. 841/2020 and I.A. No. 1288/2020 are interlinked due to similar facts and evidence and he would like to address the same arguments for disposal of these two applications. 20.It is submitted that in the order dated 13th January, 2020, the respondents were represented and participated but thereafter no compliance of that order has been done. It is submitted that directors of the holding company, being promoters of the Corporate Debtor are the guarantors of loan of the Corporate Debtor with the lender Bank. It is su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the answering respondents would have to comply with the orders. There are no particular directions given in the said order dated 13th January, 2020.It is further argued that the Respondents were not directors of the Corporate Debtor on 13th January, 2020. Thus, there can be no violation or disobedience of the said order. 27. It is submitted that no application under section 60(5) of the IBC is maintainable. It is submitted that the answering respondents have the highest regard for the order of this Adjudicating Authority and tender their unconditional apology if there has been any inadvertent violation of the order. 28. It is submitted that from the annual returns as well as Subscription Agreement dated 18/05/2012, it is evident that Respondent No.1 was never promoter of the Corporate Debtor. Therefore, shares held by Respondent No.1 in the Corporate Debtor could have never been the subject to the terms and conditions laid down in the sanction letter dated 16.11.2017. Therefore, transfer of equity shares held by Respondent No.1 (a Non promoting shareholder) in the Corporate Debtor, to Respondent No.7 cannot be in violation of the said sanction letter dated 16th November, 2017. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... base of 3.5 lakh (approx.) In the meantime, respondent No.1 Company (IMCL) expressed its desire to jointly carry on the business in Hoogly with the LCOs. A shareholders cum Operators agreement was executed on 29.03.2012. By virtue of the said agreement, IMCL became majority shareholder with 51% shareholding for implementation of the DAS, the IMCL and the LCOs jointly managed to supply 1.3 lakh boxes only whereas the requirement was 3.5. lakhs boxes to retain their subscribers. 35. It is further submitted that the said boxes were required to be supplied at a subsidised rate of Rs.500/- per boxes to the Corporate Debtor as against the cost of Rs.1650/- . At the same time the charges for supply of signal could be collected Rs.35/- only per box, when the cost was Rs. 65/- to 70/- per boxes per month only to counter the competitors. In this way, the Corporate Debtor started suffering loss. Such loss was strategically agreed with the anticipation that with implementation of the DAS in all 4 phases, and if Corporate Debtor can retain its subscribers base, all losses incurred shall be recovered. However due to delay in supply of the boxes on time, the competitors barged in and for that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on under section 9 IBC. 37. Since almost all the broadcasters have switched off the signals, the business of the Corporate Debtor almost closed down. Since the business of the Corporate Debtor has almost closed down, the staff etc.who were working have left the company. The said staff could not be paid salaries since there was a huge deficit of funds in the company. After resignation, the respondent no.4 and 5 did not enter into the registered office or any other office of the Corporate Debtor and they have intimated the IMCL as well as their representative directors to take possession of the assets, records etc. of the Corporate Debtor. 38. In view of the above, respondent no.4 and 5 are in no way responsible or in possession of any assets etc. of the Corporate Debtor. At the same time since they have already resigned from the Board they should not be impleaded in any applications as directors of the Corporate Debtor. 39. It is relevant to note that the stand taken by the applicant/RP in the present application particularly in paragraphs 7 and 10, the same are reproduced as under:- " 7. The Star India Private Limited/ Operational Creditor issued Demand Notice as per Form IV i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under:- "Having found that the transactions in question cannot be countenanced, for being of preference during a relevant time to a related party; and having approved the order passed by NCLT in that regard, we do not consider it necessary to deal with the other length of arguments advanced by the learned counsel for parties on the questions as to whether the transactions are undervalued and/or fraudulent too. In the totality of circumstances, we would prefer leaving the said questions at that only, while also leaving all the related questions of law open, to be examined in an appropriate case. However, we are impelled to make one comment as regards the application made by IRP. It is noticed that in the present case, the IRP moved one composite application purportedly under Sections 43, 45 and 66 of the Code while alleging that the transactions in question were preferential as also undervalued and fraudulent. In our view, in the scheme of the Code, the parameters and the requisite enquiries as also the consequences in relation to these aspects are different and such difference is explicit in the related provisions. As noticed, the question of intent is not involved in Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authority. 45. Seen in the background of law laid down by Hon'ble Supreme Court of India, the arena and scope of the requisite enquiries, to find if the transaction is undervalued or is intended to defraud the creditors or had been of wrongful/fraudulent trading are entirely different, we find RP has grossly erred in not considering these aspects while filing this application. And instead has resorted to blame game making allegations against the suspended board of Directors of the Corporate Debtor/respondents and other respondents without conducting any enquiry as stipulated and observed by Hon'ble Supreme Court. In the present case, we find that the RP has generalised/ vaguely asserted the facts/allegations and provisions of the Code unmindful of the law laid down by the Apex Court and as contained in provisions of the Code, upon its plain reading. 46. In the facts of the case, the RP should have started off on the basis of the balance sheets, which were available on the website of MCA/ROC, to acquire and take possession of the assets, if any of the Corporate D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent No.1 was never in control of the working of the Corporate Debtor or in control of the Board of Corporate Debtor. Respondent No.1 was never a promoter of the Corporate Debtor and the same would be evident from the aforesaid Agreement dated 18th May, 2012 and the annual returns filed by the Corporate Debtor. Therefore, the shares held by Respondent No.1 in the Corporate Debtor could have never been subject to the terms and conditions laid down in the sanction letter dated 16th November, 2017 (page 35 of the application). Therefore, transfer of equity shares held by Respondent No.1 in the Corporate Debtor to Respondent No.7 cannot be in violation of the said sanction letter dated 16th November, 2017. 49.It is surprising that the RP in its 2nd progress report submitted before this Adjudicating Authority that on 13th January, 2020, it had been specifically recorded in the order that "the corporate debtor does not have any assets". The applicant/RP had filed an application being CA (IB) 45/KB/2020 under section 19 as well as under section 66 read with sub-section (6) of Section, IBC and the bench had directed the RP to "file separate application under section 19(2) for non-coop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no order of any Court stopping Respondent no.1 from selling or transferring its own shares. Moreover, as regards alleged contempt, not a single order says or stops respondent no.1 from selling its share, which was done much prior to the order of CIRP. It is submitted that shareholding was its personal property and not the property of the Corporate Debtor. It is settled law that shares are separate and distinct from the assets of the company, and transfer of shares cannot be construed as transfer of assets of the company. No application under Section 60 or any other provisions of the Code, 2013 would lie against respondent no.1 for transferring its own shareholding. The learned counsel further submitted that the annual reports of the Corporate Debtor specifically state that respondent no.1 is not a promoter, and the management was being looked after by AMBCL who were holding 49 per cent shareholding. 54. Respondent No.1 has further submitted that it had filed a complaint before the Registrar of Companies inter alia stating that the illegalities committed by the promoters and directors of the Corporate Debtor ( page 56 of the application) and the nominee directors in the Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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