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TMI Blog2023 (5) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... l for Parties and perused the records made available including cited judgments. 3. The Counsel for Appellants stated that the present joint appeal has been filed on behalf of Gurudeo Exports Corporation Private Limited ("GECPL") - Appellant No. 1, Shree Kalka Global ("SKG") - Appellant No. 2, Neon International Traders ("NIT") - Appellant No. 3 and TLS Mercantile Pvt. Ltd. - Appellant No. 4, being aggrieved by the common 'impugned order' dated 11.03.2021 under Section 60(5)(c) of the Code, wherein by the 'Appellants' herein filed the joint application against the 'Resolution Professional' of 'Amira Pure Foods Private Limited' ('Corporate Debtor'). The 'Resolution Professional' had rejected the claims of all the four applicants, who have petitioned the 'Resolution Professional' to settle their claims, by a common e-mail dated 06.11.2019. The four Petitioners sought return of stock of their owned rice from the 'Corporate Debtor'. 4. The 'Appellants' submitted that pursuant to oral business agreements since 01.10.2016, the 'Appellants' used to purchase rice from various suppliers across the country and delivered rice directly from their suppliers to the 'Corporate Debtor's' ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' explained that this was a simple business model which involved purchases of rice by the exporters/ domestic seller (like the 'Appellants' herein) which was delivered to the premises of the 'Corporate Debtor' for processing & packaging and finally export/ domestic sale from the 'Corporate Debtor's' premises itself. The 'Appellants' stated that all the parties used to honour this time-tested business arrangement and the arrangement was working smoothly in the present case also from October 2016 to August 2018. The 'Appellants' however, stated that from September 2018, this process was not honoured by the 'Corporate Debtor', who did not permit the 'Appellants' from taking back their own rice. 8. The 'Appellants' stated that on 11.12.2018, the 'Adjudicating Authority' passed an order initiating 'Corporate Insolvency Resolution Process' (in short 'CIRP') against the 'Corporate Debtor' and appointed Mr. Akash Singhal as 'Interim Resolution Professional' (later confirmed as 'Resolution Professional', who finally became the 'Liquidator'). 9. The 'Appellants' stated that at insolvency commencement date, large quantity of stock of the 'Appellants' was illegally retained by the 'Corporate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier to the 'Appellant No. 2' and further consignment note was generated containing details of the rice. The 'Corporate Debtor' also confirmed receipt of the rice by way of various e-mails, however despite several correspondence with the 'Resolution Professional', the 'Resolution Professional' failed to give any response or seek additional clarifications and finally rejected the claims for return of rice to the 'Appellant No. 2' in violation of the oral agreement and against the spirit of the Code. 12. The 'Appellant No. 3' i.e. Neon International Traders, from 03.05.2017 to 01.08.2018, had purchased and supplied to the 'Corporate Debtor' various varieties of rice aggregating to 811.03 MT and received back rice except 84 MT which was illegally held by the 'Corporate Debtor'. The 'Appellant No. 3' further stated that he has written several letters/e-mails to the 'Resolution Professional' for his claims and received back replies vide letters/e-mails and the correspondence exchanged were dated 18.02.2019, 11.03.2019, 29.07.2019, 25.08.2019, 31.08.2019 and 10.09.2019. The 'Appellant No. 3' clarified that on purchase of rice an invoice was issued by the supplier to the 'Appellant No. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r not the oral agreements between the parties could be referred to on the basis of documents available with the parties. The 'Appellants' stated that they have fully cooperated with both experts and gave all documents as required. Rice expert gave its report on 10.10.2020 and document expert gave its report on 12.10.2020 which were filed by the 'Appellants' before the 'Adjudicating Authority'. 15. The 'Appellants' stated that the rice expert gave its report in favour of the 'Appellants' but the document expert gave its report against the 'Appellants'. The 'Appellants' submitted that they had filed detailed objection to the document expert's report and subsequently after detailed hearing the 'Adjudicating Authority' passed finally the 'impugned order' dated 11.03.2020 dismissing the Company Petition bearing no. CP-846/ND/2018 in CA No. 215 of 2020. 16. The 'Appellants' assailed the 'impugned order' which ignored the report given by the rice expert and considered the document expert export which was without any basis. The 'Appellants' also assailed the 'impugned order' on the ground that various documents, submitted to the 'Resolution Professional' establish their claims for return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Miglani (an ex-employee of the 'Corporate Debtor', who tried to act as a mediator for the 'Appellants' before the 'Resolution Professionals'), Reconciliation Statements prepared by the 'Appellants' showing the date of delivery, etc. The 'Respondents' mentioned that in the alleged Reconciliation Statements prepared by the 'Appellants', the 'Material Receipt Notes' (MRN Nos.) were mentioned to show the date of delivery, however the same were not complete and missed out several MRN Nos. in the Reconciliation Statement and for such cases the 'Appellants' did not mention the date of delivery, specific reference to any challan issued regarding return of material receipts etc. The 'Respondents' further alleged that the 'Appellants' submitted some of the unilaterally executed documents in support of the claims of delivery of rice which were not supported by any MRN or any material evidence. 21. The 'Respondents' submitted that the 'Appellants' had furnished 'Item Ledger (quantity)' of rice in their own stock registers provided to the 'Corporate Debtor' with admission that the 'Appellants' did not record the transaction of 3% rice given by them to the 'Corporate Debtor' as consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' to the IBBI, who in turn, filed criminal case against the Suspended Director of the 'Corporate Debtor' before Session Court of Dwarka vide CC No. 1659 of 2019. 25. The 'Respondents' stated that initially, Brijesh Kumar Gupta and Associate, Chartered Accountants, were appointed to ascertain the claims of the 'Appellants' who submitted their Report on 21.02.2019 contesting the claims of the 'Appellants' regarding alleged agreements between the 'Appellants' and the 'Corporate Debtor' and found that no such agreements have been proved based on evidence and the documents submitted by the 'Appellants' which were not sufficient to prove the claims of the job work agreements between the 'Appellants' and the 'Corporate Debtor'. 26. The 'Respondents' emphasised that it was only on the request of the 'Appellants' that the 'Adjudicating Authority' appointed rice expert and document expert. The 'Respondents' submitted that the 'Report' of the rice expert did not identify seven items out of eight items claimed by the 'Appellant No. 1', and for eighth item- 42 MT of Imperial Brand was rejected by the document expert for want of relevant evidence and document. Similarly, as regards, clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific-authority can enter into any specified agreement with third party which is absent in the present case and therefore the arguments of the 'Appellants' of so-called business chain based on oral agreement is not legally tenable. 30. The 'Respondents' submitted that the 'Appellants' claims to have entered into agreement with the 'Corporate Debtor' from 01.10.2016 with the 'Corporate Debtor', has been raised for the first time in this appeal and no such claims was forming part of CA 215 of 2019 before the 'Adjudicating Authority'. The 'Respondents' submitted that even here the 'Appellants' failed to disclose the name of persons who entered into such agreement and their capacity and authority. 31. The 'Respondents' stated that the MRNs allegedly to have been issued by the 'Corporate Debtor' to the 'Appellants' do not support the claim of the rice of the 'Appellants'. The 'Appellants' have claimed that their ownership rice were lying in the premises of the 'Corporate Debtor', however, the large number of MRNs which have neither been referred nor in possession of the 'Appellants' as well as in the present appeal the 'Appellants' have not supported by all MRN or acknowledgements issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '. 38. The 'Respondents' submitted that the alleged claims of the 'Appellants' regarding supply of rice for job work are not supported with the MRNs claimed to have been issued by the 'Corporate Debtor' for the reasons as explained hereinbefore. It is reiterated that the 'Appellants' claims for receiving back such processed goods from the 'Corporate Debtor' are not supported with any MRN or Delivery Challan. In addition to above, the document expert and rice expert report do not support such alleged claims of the 'Appellants'. 39. The 'Respondents' mentioned that the alleged stocks that are claimed by the 'Appellants' in CA 215 of 2019 were lying in the godown of the 'Corporate Debtor' where at number of places the board is displayed that contains 'Stock hypothecated to Banks', who disbursed more than Rs. 1,700 crore against stock and book debts to the 'Corporate Debtor', hence, the 'Appellants' cannot claim the ownership of such stock as owned by the 'Appellants'. It is also pertinent to mention here that as per the valuation carried out by the banks regarding, the possession of the 'Corporate Debtor' with local commissioner appointed by the 'Debt Recovery Appellate Tribunal' by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice. It is further the case of the 'Appellants' since they made the payment of the rice and the role of the 'Corporate Debtor' was confined merely to the assigned activities in order to make the raw rice to the export quality and the 'Appellants' always remained the owners of the said rice. According to the 'Appellants', since the 'Corporate Debtor' did not have any ownership over the rice, the 'Resolution Professional' and subsequently the 'Liquidator' had no business or authority to deny the claims of the 'Appellants' to return the rice, in accordance with the law of the land/ the Code. 42. It is further the case of the 'Appellants' that although there were no written agreements between the parties, however, the facts of the case and the details of the transactions were available through series of documentary evidence including MRNs, invoices, details of trucks, Reconciliation Statements prepared by the Appellants' and the acknowledgment by Mr. Himanshu Miglani who was an ex-employee of the 'Corporate Debtor'. 43. The 'Appellants' emphasised that the 'Liquidator' committed gross injustice in rejecting their claims on rice ownership and not taking any steps to return the rice an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the company through its Board of Director, which in turn, through proper board resolutions, authorises to enter into the agreement and the contracts. The 'Appellants' herein failed to give any such details of legally enforceable agreement for contracts whether written or oral. It is also a standard norm that the corporate entity does business based on written binding contracts which are legally enforceable contracts to protect their rights. 47. The Indian Contract Act 1872, section 2(e), defines an agreements as "every promise and every set of promises, forming the consideration for each other is an agreement". It is important to note that all contracts are valid agreements but not all agreements qualify as valid contracts. An oral agreement is as equally valid, as a written one. The legality, of an oral agreement, cannot be questioned, if it falls under the ambit of the requirements stated in section 10 of the Indian Contract Act, 1872. A valid oral agreement is of value and can be enforced in the court of law. However, it is always difficult to prove the existence or the exact terms of the agreement, in case of dispute. Oral agreements are, therefore, permissible, but tricky ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... either of 4 vendors (3 from Indore & 1 from Chennai) raises doubts. b) That these four parties failed to provide any invoice raised by APFPL for the job work charges. informed, APFPL had not issued any invoice for the charges levied by it/ quantity deducted by it and amounts so paid in kind through BARTER system are covered as service charges in GST, but no GST liability was discharged at any point of time. c) That all the 4 vendors have submitted that they have not accounted for these job work charges in the books of accounts as there was no financial transaction except deduction of 3% quantity of rice from consignment by APFPL which again raise doubts how the quantitative transactions are reconciled in financial books. d) That since none of the vendors have accounted for these transactions in the books, TDS has also not been deducted as per provision of Income Tax on payments (in kind) to APFPL. In absence of any Invoice for job work and no deduction of tax at source, it is surprising how these transactions have been agreed to between vendors & APFPL. e) That as per reconciliation statement of inward and outward stock statement submitted by vendors for our verification, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TGG Australia. Out of this 64% of supplies were made to subsidiary/associate companies of APFPL which shows direct connection of APFPL with NEON c) It is further claimed that 2 consignment of 42 MT each exported in March-April 2018 to TGG Australia were returned due to quality/brand issue by the importer and same were at APFPL Gurgaon. In our opinion, the NEON should have claim on SKG and not APFPL with regard to this 84 MT. d) It is noted that there were 2 consignment of 42 MT each valued INR 66.23 Lac and were exported to AMIRA GMBH Germany on 15.05.2018 & 26.05.2018 which remained unpaid till 2019. On 11.12.2019 the vendor has reversed these transactions in books by passing an entry of re-purchase for which no explanation provided. Status and accounting of these stocks in books has also not been explained....records also which is not in accordance with guidelines. TLS Mercantile Pvt Ltd: As claimed by the vendor vide his letter dated 28.09.2020 that he had transaction with APFPL for job work & export from their premises from 27.08.2017 to 20.05.2018 for which 345.72 MT rice was delivered against which APFPL retained 10.13 MT as their job work charges @ 3% as agreed. They h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of GST & Income tax. No satisfactory explanation provided by the vendor for these lapses b) Out of some of consignments of March, April & May 2018 so delivered at the premises of APFPL Gurgaon for job work, APFPL withhold 249.33 MT of rice out of different consignments so delivered. In spite of this withholding of stocks, the vendor continued to supply the consignments till 21.08.2018. It is further observed that APFPL provided last job work on 24.06.2018 and 133.28 MT of rice in July 2018 till 21.08.2018. No explanation provided in this regard c) All these supplies of 1373.62 MT was exported to AMIRA, USA, Dubai, Germany and to TGG Australia. Out of total exports by GECPL, 65% of supplies were made to subsidiary/associate companies of APFPL and balance to TGG Australia. d) It is further claimed that 1 consignment of 42 MT exported in April 2018 to TGG Australia was returned due to quality/brand issue by the importer and sane was returned at APFPL Gurgaon. It is observed that said consignment returned back in August 2018 and by that time there was no business activity going on at APFPL and old stock was also held by APFPL as explained above. The reason for returning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut any charges. No explanation provided in this regard by the vendor. b) The vendor has submitted that there is no formal & written agreement for these services and job work charges thereon and also no financial transaction have been accounted for in the books Including in inventory contraventions of the provisions of GST & Income tax Act. No satisfactory explanation provided by the vendor for these lapses. c) It is observed that out of some of consignments from 14.02.2018 so delivered at the premises of APFPL Gurgaon for job work, APFPL withhold 274.18 MT of rice out of different consignments so delivered. In spite of this withholding of stocks, the vendor continued to supply the consignments till 23.08.2018. It is further observed that APFPL provided last job work on 11.08.2018 and in spite of this vendor supplied 3 consignment of 89.06 MT of rice on 21.08.2018. No explanation provided in this regard. We may add here that out of total holding of stock, 179.28 MT of rice belonged to one supplier M/s Hanuman Overseas, Delhi and last 3 consignment as mentioned above are also from same supplier. d) All these supplies of 4459.93 MT was exported to AMIRA, USA, Dubai, Germany and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be so many co-incidences in all these web of transactions as claimed by all the vendors and point towards circular and round tripping transactions viz: I. All 4 vendors have claimed that there is no formal agreement for job work with APFPL; II. All vendors had dealing tenure with APFPL from August- September 2017 till July-August 2018 except SKG who was dealing since 2016. III. APFPL started withholding consignment of all vendors from March 2018 and all of them continued to supply consignments in spite of these withholding of stock by APFPL IV. All vendors supply to TGG Australia during March 2018 with returned İssue end-April of Quality/Brand and all supplies were returned at AMIRA Gurgaon Premises in spite of the fact that activity had stopped and there was stocks which was already held by AMIRA. V. All the vendors had exported rice to AMIRA, Germany from March 2018 to June-July 2018 and then reversed one or two consignments as export return/re-purchase in July-September 2019 which does not seems to be in order & may be against the provisions of RBI. Further very heavy amount is still outstanding in the books of two vendors for which no explanation received. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gical and based on all documentary evidence made available to experts. 51. This 'Appellate Tribunal' observe that the claims of the 'Appellants' need to be crystal clear and cannot be on the basis of assumptions and presumptions like Oral Agreements without any specific details, more so when the 'Corporate Debtor' and the Suspended Director/ Corporate Debtor were allegedly involved in fraud with Bank for over Rs. 1700 crores and who were investigated by the CBI and case seems to be still on. 52. Similarly, this 'Appellate Tribunal' has also taken note of the report of Mr. Om Prakash Garg, the rice expert who submitted the report on 10.10.2020. The relevant portion of the report of the rice expert reads as under : 53. This 'Appellate Tribunal' note that the 'Respondents' made averments during hearing that the one single visit was made by the rice expert on 09.10.2020 to the premises of the 'Corporate Debtor' and reported with partially identification of the rice belonging to the Appellant involving huge quantity of stock at the factory premises of the 'Corporate Debtor' including 291.33 MT of Gurudeo Exports Corporation Pvt. Ltd, 493.42 MT of Shree Kalka Global, 84.00 MT of Neon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' also note from the averment of the 'Respondents'/ 'Liquidators' that the 'Appellants' could not produce the material receipt notes issued by the 'Corporate Debtor' as per their own reconciliation Statements and there is a huge gap of 383.67 MT of Appellant No. 1, 562.19 MT of Appellant No. 2 and 5.31 MT of Appellant No. 4. Absence of such vital records, based on which claims have been filed, again do not help the cause of the 'Appellants'. 59. This 'Appellate Tribunal' note with caution the contradictory stand taken by Mr. Himanshu Miglani and also the fact that the most of acknowledgment claimed by the 'Appellants' have also been signed by the same ex-employee Mr. Himanshu Miglani. 60. In a reference, the 'Liquidator' brought out the fact the CBI is already investigating the case against the 'Corporate Debtor' involving Rs. 1,700 crores of the claims of the several banks and the stock claimed by the 'Appellants' have not been proven belonging to them. 61. We feel that no concrete evidence or documentary proof are available to substantiate the claims of the 'Appellants'. It may be the case that earlier the 'Appellants' and the 'Corporate Debtor' were involved in such types of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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