TMI Blog2021 (12) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of a promoter or in the management or control of the corporate debtor or a related party of such a person. Though the proceeding under Section 66 shall not be continued against the respondent No. 1, as the respondent No. 1 is under liquidation but the promoters, the persons in the management/control of the Corporate Debtor or a related party of such person are still liable under Section 66 of the IBC. There is no material produced on behalf of the respondents on the record, which controvert the pleadings of the applicant We further notice that the prayer of the applicant is based upon the Transaction Audit conducted by the Chartered Accountant for the period from 01.03.2013 (date of Incorporation of the Corporate Debtor) to 21.10.2019 (date of order of Initiation of CIRP against the Corporate Debtor). It is observed that so far the preferential transactions under section 43, avoidance of undervalued transaction under section 45 and section 50 are concerned, in the absence of the relevant documents and information, the Auditor has shown their inability to comment on these transactions - A perusal of the provision shows that if during the corporate insolvency resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... os. 15 to 20, to provide the details and addresses of the independent parties; e. pass appropriate order against the erstwhile/suspended board of Directors i.e. Non-Applicants/Respondent Nos. 15 to 20 under the relevant provisions of the Code; f. pass appropriate orders against the Non-Applicants/Respondents under Section 68, 69, 70 and other relevant provisions of the Code and; g. pass any other order(s) as this Hon'ble Tribunal may deem fit in the facts and circumstances of the present case. 2. The facts mentioned in the application in brief are as follows;- (i) That on perusal of balance sheet as on 31.03.2013 of the Corporate Debtor, when the Resolution Professional prima facie found that the transactions carried out during the Financial Years from 2013-14 to 2018-19 had been entered with the intent to defraud the creditors and siphon off the monies to make illicit gains, then vide letter dt. 23.02.2020, he appointed M/s. Gaurav J. Co., Chartered Accountants for carrying out transaction audit of the accounts of the Corporate Debtor, for the period from 01.03.2013 (date of incorporation of the Corporate Debtor) to 21.10.2019 (date of order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on 21.10.2019 (date of initiation of CIRP), there's mismatch of the outstanding amounts. 3. That, vide additional affidavit dt. 13.09.2021. the Applicant submitted the copy of ledger and a tabular representation depicting the period in which the bank account transactions were entered and cash withdrawals were made by the Respondent No. 1 to 21, and the details are provided hereunder: 4. That the right to file the reply on behalf of the Respondents was closed vide order dt. 13.07.2021. 5. That the Applicant has filed written submissions and submitted the following: i. That the Corporate Debtor deviating from its main objective stated under the Memorandum of Association i.e., of manufacturing foods products and beverages collected an aggregate amount of Rs. 36.73 Crores from the public at large through collective investment scheme dated 01.08.2013. ii. That out of the aforementioned amount, an aggregate amount of Rs. 15.27 Crores has been illegally transferred/siphoned off from the accounts of the Corporate Debtor to the related parties/Respondents through multiple transactions on several dates between the financial year 2012-13 to 2018-19. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made against Respondent No. 1, Moreover, as per Section 33(5) of the Code, when a liquidation order has been passed, no suit or legal proceedings can be initiated by or against the Corporate Debtor. viii. That SEBI vide its order dt. 12.02.2015 has found the Promoters/Directors (Respondent Nos. 15 to 20) guilty of running an unregistered scheme and misappropriation of funds collected from lakhs of people. The said order was upheld by SAT on 28.06.2017 and further the Recovery Officer SEBI has attached assets worth more than Rs. 1000 crore. 7. We have heard the ld. Counsel appearing for the applicant as well as the respondent No. 1. 8. The right to file the reply of the respondents was closed vide order dated 13.07.2021. Therefore, the respondent Nos. 2 to 21 have not contradicted the averments made in the application. Of course, by filing the written submission, the respondent No. 1 who is represented through its Liquidator has submitted that in view of Section 33(5) of the IBC, no suit or legal proceedings can be initiated by or against the Corporate Debtor. 9. It is further contended on behalf of the respondent No. 1 that the respondent Nos. 15 to 20 are the Prom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is clear that the moratorium provision contained in Section 14 of the IBC would apply only to the corporate debtor, the natural persons mentioned in Section 141 continuing to be statutorily liable under Chapter XVII of the Negotiable Instruments Act . The Hon'ble Supreme Court further held that Section 138/141 proceeding against the Corporate Debtor is covered by Section 14(1)(a) of the IBC. 14. Applying this principle, after the initiation of CIRP in terms of Section 14(1), all proceedings, the institution of suit or continuation of pending suits against the corporate debtor shall remain stay during the Moratorium. Similarly in terms of Section 33(5) when a liquidation order is passed no suit or other legal proceeding shall be instituted by or against the Corporate Debtor. Of course, it is subject to the provision contained in Section 52 of the IBC. 15. At this juncture, we would also like to refer to Section 32A of the IBC and the same is quoted below:- Section 32A: Liability for prior offences, etc. 32A. (1) Notwithstanding anything to the contrary contained in this Code or any other law for the time being in force, the liability of a corporate debto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Part II of this Code to a person, who was not-- (i) a promoter or in the management or control of the corporate debtor or a related party of such a person; or (ii) a person with regard to whom the relevant investigating authority has on the basis of material in its possession reason to believe that he had abetted or conspired for the commission of the offence, and has submitted or filed a report or a complaint to the relevant statutory authority or Court Explanation.--For the purposes of this sub-section, it is hereby clarified that,-- (i) an action against the property of the corporate debtor in relation to an offence shall include the attachment, seizure, retention or confiscation of such property under such law as may be applicable to the corporate debtor; (ii) nothing in this sub-section shall be construed to bar an action against the property of any person, other than the corporate debtor or a person who has acquired such property through corporate insolvency resolution process or liquidation process under this Code and fulfils the requirements specified in this section, against whom such an action may be taken under such law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 cores during the Financial Year 2013-14 to 2018-19. At the cost of repetition the scanned copy of the amount collected and transfer is reproduced below:- 21. It is further seen that on basis of the reconstructed account the corporate debtor has transferred the funds to the parties other than related parties during the year 2012-13 and 2018-19 and a list of the loan reflected in the audit balance sheet of related parties of the corporate debtor is also shown in the audit report which shows that the said amount was transferred to the accounts of the persons shown in the table. A scanned copy of both the lists is reproduced below. 22. On perusal of the Audit Report, we observe that so far the preferential transactions under section 43, avoidance of undervalued transaction under section 45 and section 50 are concerned, in the absence of the relevant documents and information, the Auditor has shown their inability to comment on these transactions. But so far the transactions under section 66 i.e. fraudulent transactions are concerned, the Auditor at the internal page 21 and page 53 of the Auditor's Report has given a finding in our opinion the said observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solution process is suspended as per section 10A. Explanation.--For the purposes of this section a director 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 functions as are carried out by such director or partner, as the case may be, in relation to the corporate debtor. 24. A perusal of the provision shows that if during the corporate insolvency resolution process or liquidation process, it is found that any business of the corporate debtor has been carried out on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose the Adjudicating Authority may on the application of the resolution professional or liquidator as the case may be pass an order. 25. In terms of the provisions and the Transaction Audit Report, when we consider the submissions of the applicant then we are of the considered view that the transactions referred to in the Transactions Audit Report, comes under the purview of section 66 of the IBC. 26. In sequential to above, we are, therefore, of the considered view that respondents No. 2 to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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