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TMI Blog2022 (7) TMI 234X X X X Extracts X X X X X X X X Extracts X X X X ..... kas Garg was appointed as the interim resolution professional. Later own in the 1st COC meeting held on 15.01.2020 appointed Mr. Tarun Batra as the RP of the corporate debtor. 3. The applicant states that they have come across certain instances of transactions i.e. preferential transactions in the independent transaction audit report and the same are carried with intent to defraud creditors. 4. The total claim which was admitted was Rs. 2351.97 Lakhs including claims of financial creditors i.e. Rs. 2277.80 Lakhs and claims of operational creditors i.e. Rs. 74.17 Lakhs. The applicant further stated that the Corporate Debtor has availed financial assistance from Punjab National Bank and ICICI Bank Limited and total claim admitted from financial creditors are Rs. 2277.80 Lakhs. It is pertinent to note here that ICICI Bank Limited has not submitted its claim as financial creditor. The COC in its second meeting appointed A.K.G. & Associates for carrying transaction audit for the period of 01.04.2017 to 04.12.2019. Upon perusal of the final transaction audit report dated 20.03.2020 reflects large number of irregularities in conduct and business management of the Corporate Debtor. The c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 43, out of total amount paid, payment of Rs. 10.29 Lakhs has been made under the period of 04.12.2017 to 04.12.2019 which will be covered under section 43 as preferential transaction and the said transaction with the suspended director is not done in ordinary course of business and to be considered as preferential transactions. III. Radico Trading Limited (related party and Corporate Guarantor of the Corporate debtor)- Observation made by the transaction Auditor that Rs. 5.25 Crores were payable to the party as on 04.04.2017, during the audit period the Corporate Debtor has received Rs. 20.85 Lakhs from the party and Rs. 4.08 Crores has been paid against the opening payable balance. However, due to time limit under section 43, out of total amount paid, payment of Rs. 2.86 Crores will be covered under section 43 as preferential transaction for the period of 04.12.2018 to 04.12.2019 and the payment of Rs. 4.07 Crores for the period of 04.12.2017 to 04.12.2019. And it is to be noted that the said transactions are not done in the ordinary course of business and to be considered as preferential transaction. IV. G.G. Enterprises- Observation made by the transaction Audito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Corporate Debtor to beneficiary and to keep the assets out of the reach of the creditors. The said transactions were not done in ordinary course of business and not to be considered as Undervalue Transactions under section 45. II. R.K. International- The corporate debtor during the review period has made sales of 20234.90 quintal of Rice at average sales rate of Rs. 787.37 per quintal amounting to Rs. 159.32 Lakhs. The Corporate Debtor has booked loss of Rs. 744.12 Lakh by selling 20234.90 quintal of Rice. The cost value of stock was Rs. 4464.76 per quintal. The amount of undervalue transactions is Rs. 744.12 Lakh, without considering the profit element. Purposely the suspended director has done these undervalue transactions to transfer the assets of the corporate debtor to beneficiary and to keep the assets out of the reach of the creditors. The bank transactions with this party are also made in a single month to adjust the balance. The enquiry letter issued by the Applicant/Resolution Professional are also returned undelivered due to non-existence of the party at address. The said transactions were not done in ordinary course of business and not to be considered as Undervalue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Related Party)- It was observed by the Transaction Auditor, that during the month of November 2019 the suspended directors has sold its 4 vehicles/trucks to the related party. The said sales have been made below the fair market value as per the valuation available on public domain. It's merely a books entry to exclude such assets from the reach of secured creditors. The suspended director has purposely done these undervalue transactions to transfer the assets of the corporate debtor to beneficiary and to keep the assets out of the reach of the creditors. The said transactions were not done in ordinary course of business and not to be considered as Undervalue Transactions under section 45. 7. It is further submitted by the Applicant that in the transaction auditor report it has been observed that the suspended directors have made most of its sales and purchases with the same party/group. The total sales of Rs. 1121.6 Lakhs and Purchases of Rs. 882.19 Lakhs was made through these parties. The adjustment of purchase and sales without bank transaction is Rs. 492.52 Lakhs. Additionally, the corporate debtor has been making sales and purchases with group of common entities as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efraud the creditors. V. Life Time Enterprises-The Suspended has made purchase of Rs. 319.62 Lakhs during the review period. The said amount had been adjusted without any bank transactions. The said purchase transactions were entered by the suspended directors without any movement of goods and only for purpose of inflating the purchase and stock values in the books of corporate debtor. The suspended directors have purposely done these fraudulent transactions with the intent to defraud the creditors. VI. Panchdev Foods and Chemicals Pvt. Ltd.- Observation made by the transaction auditor that the suspended directors have made sales of Rs. 32.63 lakh during the month of Jan-2019 and Feb-2019. The Corporate Debtor has received Rs. 86.00 lakh against the sales made. was also observed that the Corporate Debtor has adjusted Rs. 21.50 Lakh with Kamal Enterprises and Rs. 3.27 has been adjusted against the Electric Bill. On verification of invoices by Transaction auditor for the FY 2018-19 it was observed that out of total sales of Rs. 26.09 Lakhs has been carried out with self-owned vehicles of the Corporate Debtor at the time of the execution of sale. The suspended directors have purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Mumbai Agricultural Produce Marketing Committee (APMC) located in Vashi, Navi Mumbai, Maharashtra. It is not related in any way to the corporate debtor and its transactions with the corporate debtor have been only for the purpose of trade and business. The respondent does not fall under the ambit of 'related party' as per the definition stated in Section 5(24) of the IBC, 2016. b) As per the Transaction Audit Report dated 15th May 2020, It is pertinent to note that there is an exhaustive disclaimer in the Transaction Audit Report (at page 98 of the Application) which states that the report does not confirm to any national or international accounting standards. It further states that the report may not be deemed to advocate 'any position on behalf of any party in any legal matter or proceeding. Furthermore, under the heading 'Limitations/Disclaimers' the report under clause (k)states that no invoices of purchases or any other supporting documents were available on record, therefore we were unable to verify the same and in clause (L) its stated that no invoices of sales or any other supporting documents of the FY 2017-18 were available on record, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The respondent No. 6 has placed on record copies of Purchase Orders, Statement of bank accounts and ledger accounts to show that the alleged transactions were done during the ordinary course of business. There is nothing on record to show that the respondent no. 6 is a related party to the corporate debtor. Therefore, since there is nothing on record to suggest that the respondent no. 6 is a related party then the relevant time period would be one year prior to commencement of CIRP and thus, the alleged transactions are outside the purview of Section 43 of the Code in respect to the Respondent No. 6. 13. In respect to the other respondents, it is seen that despite service of notices, no one appeared on behalf of any of the remaining respondents. The Transaction auditor in the transaction audit report has clearly pointed out the transactions which covered under Section 43, 45 and 66 of the Code. 14. The sub-section (1) of Section 25 casts a duty upon the Resolution Professional to preserve and protect the assets of the Corporate Debtor Company, including the continued business operations of the Corporate Debtor Company. Clause (J) of sub-section (2) of Section 25 casts duty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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