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TMI Blog2023 (3) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... Law Tribunal'), Division Bench - II, Chennai. Comp. App (AT) (CH) (INS.) No. 189 of 2022 : 2. The 'Appellant / Petitioner' ('Liquidator' of 'M/s. Senthil Papers and Boards Private Limited'), has preferred in the instant Comp. App (AT) (CH) (INS.) No. 189 of 2022, on being dissatisfied with the 'impugned order' dated 29.03.2022 in MA/1372/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017, passed by the 'Adjudicating Authority', ('National Company Law Tribunal'), Division Bench - II, Chennai. 3. Earlier, the 'Adjudicating Authority' ('National Company Law Tribunal', Division Bench - II, Chennai), while passing the 'impugned order' dated 29.03.2022 in MA/1372/2019 & MA/1373/2019 in MA/1130/CAA/2019 in CP/612(IB)/2017 (Filed under Section 60 (5), read with Rule 11 of NCLT Rules, 2016), at Paragraphs 16 to 19, had observed the following: 16. "Heard the Counsels for both the Parties, and perused the documents on record including the judgements, memos and written statements. The Corporate Debtor was ordered for Liquidation vide Order dated 14.02.2019 by this Adjudicating Authority. It is seen from the Orders of the Respondents that the Provisional attachments were made on 01.11.2019. At t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mits that the 'Adjudicating Authority' ('Tribunal'), had failed to consider the intent of the 'Appellant / Liquidator', in filing the 'Petitions', as part of his duty and to protect and preserve the 'Assets' of the 'Corporate Debtor'. 5. The Learned Counsel for the Appellant contends that the 'Adjudicating Authority', had erred in appreciating that the ingredients of Section 60 (5) of the I & B Code, 2016, enjoins the 'Tribunal', to 'entertain' and 'dispose of', any 'question of priorities' or 'any question of Law or Facts', arising out of or in relation to the 'Insolvency Resolution' or 'Liquidation Proceedings' of the 'Corporate Debtor', under the I & B Code, 2016. 6. The Learned Counsel for the Appellant points out that the 'Adjudicating Authority' ('Tribunal'), should have seen that the 'Books of the Corporate Debtor' and 'Income Tax Returns', evidence 'Nil cash inflows', into the 'Corporate Debtor', during the period of demonetization and thereby, the 'Corporate Debtor's Assets', shall not be covered under , 'The Prohibition of Benami Property Transactions Act, 1988'. 7. According to the Appellant, the 'Adjudicating Authority' ('Tribunal'), should have noted that the 'Compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s out with a plea that the 'Adjudicating Authority', should have exercise the power vested in it, under the provisions of the I & B Code, 2016, notwithstanding anything contained in any other Law, for the time being inforce, especially by virtue of Section 238 of the I & B Code, 2016. 13. The Learned Counsel for the Appellant points out that the 'Moratorium' of the 'Corporate Debtor', had commenced on 14.11.2017, by means of the 'Corporate Insolvency Resolution Process Order', and the same is continuing, pursuant to the 'Order of Liquidation', passed on 14.02.2019, as per Section 33 (5) of the I & B Code, 2016. But, in violation to the 'Moratorium', the 'Respondent' / 'Department', had issued a 'Show Cause Notice' and a 'Provisional Attachment Order', both dated 01.11.2019, against the 'Assets' of the 'Corporate Debtor'. 14. The Learned Counsel for the Appellant, refers to the 'Reply' of the 'Liquidator, dated 20.11.2019 (vide Annexure 5, page 50 of the Appeal Paper Book in Comp. App (AT) (CH) (INS.) No. 188 of 2022, whereby, it was informed categorically (by the Liquidator), in regard to the date of 'Moratorium' and the 'Assets' of the 'Corporate Debtor', were not purchased from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a Plea that the 'Appellant / Liquidator', has assailed the 'Assessment Order', dated 31.12.2019, before the 'Commissioner of Income Tax' ('Appeal'), and the same was 'allowed', by the 'Commissioner of Income Tax' ('Appeal'), on 31.03.2022, observing that there was no need to add sum of Rs.400/- Crores protectively in the hands on the 'Corporate Debtor', over and above, the Addition, in the hands of 'Directors' of the 'Corporate Debtor', and the 'Respondent', had filed an 'Appeal', against the said Order, wherein 'no Stay', was granted, by the 'Appellate Tribunal'. 18. The Learned Counsel for the Appellant points out the responsibility of paying back the alleged Sum of Rs.400/- Crores, is not vested in the hands of the 'Ex-Directors' of the Corporate Debtor', not the 'Corporate Debtor', and hence, question of the 'Attachments of the Properties' of the 'Corporate Debtor', does not arise. 19. The Learned Counsel for the Appellant points out that the 'Properties', attached by the 'Respondent', are already charged with the 'Registrar of Companies', but also 'mortgaged', to the 'Secured Creditors', in the year 2013, by means of 'Registered Memorandum of Deposit of Title Deeds', d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'Corporate Debtor'. 24. The Learned Counsel for the Appellant points out that the Manoj Kumar Judgment, delivered by the 'Appellate Tribunal', had explained the applicability of Section 32A on the attachments made by 'PMLA', on the 'Properties' of 'Corporate Debtor', and further held that if a property is attached, under 'PMLA', which is belonging to the 'Corporate Debtor', if 'Corporate Insolvency Resolution Process', is initiated, the property should become available to full objects of I & B Code, 2016, till a 'Sale' of 'Liquidation Asset' occurs. 25. The Learned Counsel for the Appellant, relies on the Judgment of this 'Tribunal', dated 17.02.2020 in JSW Steel Ltd. v. Mahendar Kumar Khandelwal & Ors., uphold the 'Order', passed by the 'National Company Law Tribunal', on applying retrospective effect of the Ordinance, 2019, to the attachments made prior to the 'Ordinance' and accordingly, declared that the attachments are illegal and without jurisdiction. 26. The Learned Counsel for the Appellant points out that the Hon'ble Supreme Court of India in its Judgment dated 07.02.2001 (in Appeal (Civil) No. 3760 of 1995 in the matter of Solidaire India Ltd. v. Fairgrowth Financial S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have the power to deal with the properties mentioned in the 'Order' dated 28.01.2020, passed by the Initiating Officer U/s. 24(4) of PBPT Act in Order No. 39/DCIT(PB)/2019-20 and 'Order', passed by the 'PBPT Adjudicating Authority', U/s. 26(3) in his order dated 03.11.2021 in Order F. No. OCA/MDS/124/2021, under IBC Code, 2016. 32. According to the Respondent, the 'Adjudicating Authority', after providing an 'Opportunity of Hearing', had determined under Section 26(3) of the 'Prohibition of Benami Property Transactions Act, 1988', that if the 'Assets' of a 'Person' or 'Benami Assets', then, under Section 27 of the said Act, the 'Adjudicating Authority, shall make an 'Order', confiscating the property, held to be 'Benami Property'. Furthermore, if an 'Appeal', is filed before the 'Appellate Tribunal', the 'Confiscation of Property', shall be made, subject to the 'Order' of the 'Appellate Tribunal', under Section 46 of the 'Prohibition of Benami Property Transactions Act, 1988'. 33. The contention of the Respondent is that, as per 'Section 27 subclause (3) of the PBPT Act, 1988', once, the 'Confiscation Order', was passed, in that event, all the rights and title in such property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 SC 1351], wherein, at Paragraph 40, it is observed as under: 40. "Therefore in the light of the statutory scheme as culled out from various provisions of the IBC, 2016 it is clear that wherever the corporate debtor has to exercise a right that falls outside the purview of the IBC, 2016 especially in the realm of the public law, they cannot, through the resolution professional, take a bypass and go before NCLT for the enforcement of such a right." 37. On the side of the Respondent, a reliance is placed upon the Judgment of this 'Tribunal' dated 18.08.2022, in C. Ramasubramaniam, Liquidator of Padmaadevi Sugars Ltd. Vs. DCIT (Benami Prohibition), in Company Appeal (AT) (CH) (Ins) No. 292 / 2022, wherein, it is observed as under: "It must be borne in mind that in the act / transaction of 'Money Laundering', there is 'Washing the Money'. In case of a 'Benami Transaction', to evade or avoid 'Tax' or 'defrauding' the 'Revenue', the 'Victim' is the 'State' and not the 'individual', which in 'Law' is 'species' of 'fraud'. The 'onus' of establishing that a particular 'sale&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ah, RP of KSL and Industries Limited V. Enforcement Directorate, Kolkatta, had observed as under: 110. "As far as the present case is concerned, the 'Appellant/Resolution Professional' even though has filed Company Appeal (AT) (Ins) No. 817 of 2021 being dissatisfied with the order dated 31.12.2020 in IA 81 of 2020 in CP(IB) No. 397/NCLT/AHM/2018 [filed by the Applicant / IRP for KSL Industries Ltd./Corporate Debtor under Sections 14, 18, 25 & 60(5) of Code] seeking to set aside the 'Attachment of the Property of the 'Corporate Debtor' by the Respondent/Enforcement Directorate vide order dated 24.10.2019 passed by the 'Adjudicating Authority' PMLA etc., this 'Tribunal' makes it candidly clear that filing of Application under Section 60(5) of the I & B Code is not an 'all pervasive' one, thereby conferring 'Jurisdiction' to an 'Adjudicating Authority' (NCLT) to determine 'any question/issue of priorities', question of Law or Facts pertaining to the 'Corporate Debtor' when in reality in 'Law', the 'Adjudicating Authority' (NCLT) is not empowered to deal with the matters falling under the purview ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mi Property Transactions Act, 1988, defines 'Benamidar' meaning, 'a person or a fictitious person, as the case may be, in whose name the benami property is transferred or held and includes a person who lends his name'. Attachment: 44. Section 2 (5) of the Act 1988, defines 'Attachment' meaning, 'the prohibition of transfer, conversion, disposition or movement of property, by an order issued under this Act'. Benami Property: 45. Section 2 (8) of the Act 1988, defines 'Benami Property' meaning, 'any property which is the subject matter of a 'Benami Transaction' and also includes the proceeds for such property'. Benami Transaction: 46. Section 2 (9) of the Act 1988, defines 'Benami Transaction' meaning, (A) a transaction or an arrangement__ (a) where a property is transferred to, or is held by, a person, and the consideration for such property has been provided, or paid by, another person; and (b) the property is held for the immediate or future benefit, direct or indirect, of the person who has provided the consideration, except when the property is held by- (i) a Karta, or a member of a Hindu undivided family, as the case may be, and the property is held for his benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) a company; (iv) a firm; (v) an association of persons or a body of individuals, whether incorporated or not; (vi) every artificial juridical person, not falling under sub-clauses (i) to (v);" Property : 48. Section 2(26) of the Act, 1988, defines 'Property' meaning assets of any kind, whether movable or immovable, tangible or intangible, corporeal or incorporeal and includes any right or interest or legal documents or instruments evidencing title to or interest in the property and where the property is capable of conversion into some other form, then the property in the converted form and also includes the proceeds from the property. Classification of Benami Transactions: 49. The Hon'ble Supreme Court of India in the matter of Meenakshi Mills Ltd. v. CIT, reported in AIR 1957 SC at Page 49, had classified 'Benami Transactions', into 'Genuine' or 'Real' and 'Sham' Transactions, the 'distinguishing feature', being an 'intention' of 'Transferor' or 'Vendor', to actually give 'Possession', to the 'Purchaser', in 'whatever name' or 'Retain' the 'Title' and 'Beneficial Interest', to himself. 50. Further, in the aforesaid decision, it is observed as under: "The word 'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson who has contributed the purchase money in the former case and upon the intention of the person who has executed the conveyance in the latter case. The principle underlying the former case is also statutorily recognized in Section 82 of the Indian Trusts Act, 1882 which provides that where property is transferred to one person for a consideration paid or provided by another person and it appears that such other person did not intend to pay or provide such consideration for the benefit of the transferee, the transferee must hold the property for the benefit of the person paying or providing the consideration. This view is in accord with the following observations made by this Court in Meenakshi Mills, Madurai v. The Commissioner of Income-Tax, Madras [1956] S.C.R. 691 at p. 722." Attachment of Property : 52. Section 24 of The Prohibition of Benami Property Transactions Act, 1988, enjoins the 'Initiating Officer', to 'Attach', the 'Benami Property', only provisionally that too, with 'prior Approval' of the 'Approving Authority'. 53. Section 24(2) of the Act, 1988, provides for an 'Issuance of Notice', as per Section 24(1) of the Act for the 'Benamidar', as well as the 'Benef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1952 SC Page 369, Page 390), but, when 'enacting part', is cleared its 'Scope', cannot be cut down or 'enlarged', by 'resort' to 'Non-obstante Clause'. 61. A 'Conflict', between the 'two Special Acts', which both contain 'not-withstanding clauses', can also be 'resolved', by looking, which is more 'special', than the 'other', in addition to the consideration that the 'Conflict', arose because of a 'provision' added later in the 'act', which is more 'special'. Principle of Election : 62. Where there is 'no repugnancy' or 'inconsistency', between the 'two remedies', 'Principle of Election', will not 'Apply', in the considered opinion of this 'Tribunal'. Income Tax Dues : 63. The 'Income Tax Dues', are like 'Crown Debts', as per decision of the Hon'ble Supreme Court of India in Principal Commissioner of Income Tax v. Monnet Ispat and Energy Ltd. (2018) 211 Comp Cas 99 (SC). Liquidator : 64. There is no 'two opinion' of a 'pivotal fact' that the 'Liquidator's actions', are to be under the 'parental supervision' of an 'Adjudicating Authority' ('Tribunal'). A 'Liquidator', has 'no unfettered powers', to 'discharge', his 'duties', but, he is to 'perform', his 'functions', in a ' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor / Shareholder of the Corporate Debtor, had preferred an 'Appeal', i.e., Comp. App (AT) (INS.) No. 432 of 2019, before the 'Appellate Tribunal', and the 'Appellate Tribunal', was pleased to 'Disposed of', the 'Appeal', on 03.05.2019, by making the following observations: "In view of the observations aforesaid, we hold that the Liquidator is required to act in terms of the aforesaid directions of the Appellate Tribunal and take steps under Section 230 of the Companies Act. If the members of the Corporate Debtor or the Creditors or a class of creditors like 'Financial Creditor' or 'Operational Creditor' approach the Company through the liquidator for compromise or arrangement by making proposal of payment to all the liquidator for compromise or arrangement by making proposal of payment to all the creditor(s), the Liquidator on behalf of the will move an application under Section 230 of the Companies Act, 2013, before the 'Adjudicating Authority' i.e., National Company Law Tribunal, Chennai Bench, in terms of the observations as made in above." 71. It comes to be known that one Mr. O. Arumugasamy, an Ex-Director / Shareholder, had placed a Scheme of Compromise / Arrangement (un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner', had enclosed the Copy of the Audited Balance Sheets for the Financial Years 2016-17, 2017-18 and 2018-19, Income Tax Returns for the Years 2016-17, 2017-18 and 2018-19 and the Bank Statements from October 2016 to March 2017 of the Corporate Debtor. 76. The prime plea of the Appellant / Petitioner / Liquidator is that, when the Charge on the Assets was subsisting, it is not known, as to how, such transactions could have been made and any transaction sought to be made, during the subsistence of Charge by the 'Suspended Director', 'Promoters' and 'Boards', is void. Further, the 'Assets' sought to be attached, continued to stand in the name of the 'Corporate Debtor', which the 'Creditors', are entitled to. 77. According to the Respondent / Department, during 2017, search actions (under the Income Tax Act, 1961), were initiated in respect of Smt. V.K. Sasikala and Others and that resting upon the materials emanated during search proceedings, information relating to certain Transactions was sent to the Office of DCIT, Respondent, vide Letter dated 17.05.2019, by the JDIT (Inv.) (OSD), Unit-2(1), Chennai, and the information reflected that numerous incriminating documents and loo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' of the 'Corporate Debtor'. Viewed in that perspective, the 'Attachment', made as per Section 24(3) of 'The Prohibition of Benami Property Transactions Act, 1988', cannot be a 'subject matter' of 'proceedings', under Section 60(5) of the I & B Code, 2016, in the considered opinion of this 'Tribunal'. To put it differently, the 'Adjudicating Authority' ('National Company Law Tribunal'), is not the proper 'FORA', to determine the controversies, revolving around the 'Attachment' of the 'Property', under 'The Prohibition of Benami Property Transactions Act, 1988', as held by this 'Tribunal'. As such, it is held by this 'Tribunal', that the filing of the instant Comp. App (AT) (CH) (INS.) Nos. 188 and 189 of 2022, by the 'Appellant / Petitioner / Liquidator', per se are 'not Maintainable', in the 'eye of Law'. 82. At this stage, this 'Tribunal', pertinently points out that the 'Onus', has to be strictly discharged by adducing legal evidence of the 'Definitive Character', which would either directly prove the fact of 'Benami' or 'establish' circumstances unerringly and reasonably, raising an inference of that fact, as per decision of the Hon'ble Supreme Court of India in Jaydayal Podd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver', the 'Property', held 'Benami', for matters connected therewith or incidental thereto. 89. However, the preface to the I & B Code, 2016, shows that it is meant to consolidate and amend the 'Laws', relating to 'Reorganisation and Insolvency Resolution of Corporate Persons, Partnership Firms and Individuals', in a time bound method, ofcourse, for 'Maximisation of Values', etc. 90. A closure scrutiny of 'The Prohibition of Benami Property Transactions Act, 1988', and the 'I & B Code, 2016', clearly exhibit that they do operate in their own field and without any simmering doubt, this 'Tribunal', without any 'haziness', holds that an 'element of public interest', is involved in 'PBPT Act'. 91. Only when a Resolution Plan was approved by the 'Adjudicating Authority' ('Tribunal'), Section 32A of the I & B Code, 2016, gets attracted. In reality, an 'Adjudicating Authority' ('Tribunal'), cannot traverse upon matters which is beyond its 'scope'. To put it precisely, 'issues'/'disputes', pertaining to an 'Attachment', effected under 'The Prohibition of Benami Property Transactions Act, 1988', cannot be gone into, by an 'Adjudicating Authority' ('Tribunal'), under the I & B Code, 2016. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... confirmation of addition in the hands of the Directors, the grounds raised by the appellant company upon the issue of addition of Rs.400 Crore in the hands of the company protectively are allowed. 7. In the result, the appeal is treated as allowed." 97. It is brought to the notice of this 'Tribunal', on behalf of the 'Respondent / Department' that, as against the said 'Order', dated 31.03.2022, passed in CIT (A), the Income Tax Department, had filed an 'Appeal', before the 'Income Tax Appellate Tribunal', bearing No. 503/Chny/2022, and the same is pending. No wonder, in 'Law, an 'Appeal', is a continuation of 'Original Proceedings'. 98. Be that as it may, in the light of foregoing qualitative and quantitative discussions, this 'Tribunal', taking note of the divergent contentions advanced on either side, considering the fact that 'Liquidator', cannot bypass a remedy, provided under ''The Benami Transactions (Prohibition) Act, 1988', in assailing the 'Order', passed by the 'Adjudicating Authority', before the 'Appellate Tribunal', under the 'PBPT Act, 1988', keeping in mind of the surrounding facts and circumstances of the case, in a holistic fashion, comes to a resultant ..... X X X X Extracts X X X X X X X X Extracts X X X X
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