TMI Blog2023 (5) TMI 724X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 International Traders and 58.94 MT TLS Mercantile P. Ltd. and total rice claimed to have been identified by the rice expert was 927.69 MT of four Appellants altogether in one single visit by rice expert. The Resolution Professional/Liquidator is agreed upon, that the report of the rice expert perhaps has been prepared in hurry and can not be treated as conclusive and authentic and therefore cannot be fully relied upon in order to accept the claims of the Appellants - the Appellants have not disputed that the Corporate Debtor never issued any invoice of job work to the Appellants and the Appellants also admitted that they have not recorded the payment of job work consideration in their own Audited Books of Accounts. 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mon 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 manufacturing unit located at 21st Mile stone, Pataudi Road, Village Harsaru, Dist. Gurgaon, Haryana-123504. The Appellants further submitted that it was broad understanding between the parties that after carrying out the job work, the Corporate Debtor would retain 3% of rice delivered and return 97% of the processed rice to the Appellants . As per the Counsel for Appellants, the supply of rice to the Corporate Debtor was for the purpose of cleaning, sorting and packing the rice delivered by the Appellants and to sell the rice packages directly from the premises of the Corporate Debtor . 5. The Appellants submitted that the Corporate Debtor gave several documents to the Appellants which support their claims including rice purchase invoices , material receipts , e-mails , affidavit provided by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsolvency 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 Debtor at its factory premises and retained 291.33 MT of Gurudeo Exports Corporation Pvt. Ltd- Appellant No. 1, 493.42 MT of Shree Kalka Global- Appellant No. 2, 84.00 MT of Neon International Traders- Appellant No. 3 and 58.94 MT TLS Mercantile P. Ltd. - Appellant No. 4, thus total rice involved which was illegally retained by the Corporate Debtor was 927.69 MT of four Appellants altogether. 10. The Appellants stated that the Appellant No. 1 i.e. M/s Gurudeo Exports Corporation Pvt. Ltd. from 04.09.2017 to 21.08.2018 had purchased and supplied to the Corporate Debtor various varieties of rice aggregating to 1634.08 MT and received back rice except 291.33 MT which was illegally held by the Corporate Debtor . The Appellants further stated that they have written several letters/e-mails to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 3 in violation of the oral agreement and against the spirit of the Code. 13. The Appellant No. 4 i.e. TLS Mercantile Pvt. Ltd. stated that from 27.08.2017 to 07.08.2018 they had purchased and supplied to the Corporate Debtor various varieties of rice aggregating to 345.72 MT and received back rice except 58.94 MT which was illegally held by the Corporate Debtor . The Appellants further s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany 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 of rice, were rejected by the Resolution Professional and the same was upheld in the impugned order . The Appellants stated that Liquidator was not empowered to reject the lawful claims of the Appellants , which were in the nature of civil matters to be decided by the Civil Courts. The Liquidator also failed to appreciate the business methodology between the parties and the claim of the Appellants on the ownership of the rice which could not be put in the liquidation estate. 17. The Appellants submitted that they conducted the business in good faith and as per usual business practices being followed in the unorganised sector. The Appellants also submitted that oral agreement cannot be ignored which became the basis for the various transactions over the years betw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of job work. As per the Respondents , the Appellants also admitted that 3% rice claimed to be given during the relevant financial years has not been recorded as expenses in their Audited Financial Statement, as they did not receive any invoice of job work from the Corporate Debtor from 01.10.2016. 22. The Respondents further stated that the Appellants suo-moto filed an additional affidavit before the Adjudicating Authority with the affidavit of Mr. Himanshu Miglani, ex-employee of the Corporate Debtor dated 03.11.2020 which did not prove the claims of the Appellants . The Respondents also stated that the Appellants had submitted some of the MRNs with the alleged claims to have been issued by the Corporate Debtor which, in fact were issued and signed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, claim of Appellant No. 2 , rice expert identified 96 MT lying in Package in 50 kg marking Agrino Greece , however this claim was rejected by the document expert for want of evidence. The Respondents submitted that as regard the claims of Appellant No. 3 , although rice expert indicated Export Returned Goods with two identification marks, however these were not supported by ownership of claims by the Appellant No. 3 and the document expert also did not support the claims. The Respondents further submitted that the rice expert did not identify two items out of three items claimed by Appellant No. 4 and the third item identified by rice expert as Loose in Gunny Bags , however the same was not supported by the Appellants through evidence of delivery of such rice/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued 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 issued by the Corporate Debtor , as such the Appellants claim of rice lying with the Corporate Debtor and therefore their claims are unfounded and not supported by documentary evidence. 32. The Respondents submitted that it is a matter of fact and record that the assets including stock lying in the godown is under registered charge under the Companies Act, 2013 with more than 10 Banks have claim of about Rs. 2,000 crores as Secured Creditors. There is no document on record from bankers of the Corporate Debtor to prove that goods supplied by the Appellants would form the part of such claimed security/ charge. 33. The Respondents submitted that the issue related to consignment note/ stuffing details for export in the invoice raised by the Appellants ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 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 independent agencies/ professional (Shah Jindal and Associates, Chartered Accountants) on 09.01.2019 shows that the value of stock lying in the godown and factory warehouse of the Corporate Debtor is Rs. 2.4658 crores, against total loan of approx. Rs. 1700 crores. 40. This Appellate Tribunal noted the contention of the Appellants , being dealer in rice, had engaged the Corporate Debtor for performing job work and mostly such business is in unorganised sector. We have taken into consideration that the Appellants used to procure the rice from the various suppliers from the market who dispatched directly to the premises of the Corporate Debtor . According to the Appellants , they used to export or domestic sale and as per their instru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and similarly the Adjudicating Authority also gravely erred in dismissing their application before the Adjudicating Authority . One of the main basis of the Appellants claims seems to be the report of the rice expert which allegedly establishes the claims of the Appellants. 44. We observe that the Respondents / Liquidator , on the contrary, mentioned that he has taken all required steps to collate and verify the claims. In this directions, Brijesh Kumar Gupta and Associate, Chartered Accountants were appointed as experts to verify the claims of the Appellants . This was done after approval of the CoC. However, the experts (Chartered Accountants) did not find the claims of the Appellants to be genuine and tenable due to lack of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 to prove during dispute, as seen in the present case. It is based on several pieces of evidence. This Appellate Tribunal is conscious of the fact that the proceedings under I B Code is summary proceeding and not like Civil Court, where the evidence are examined and cross examined, therefore, such examination/ cross examination of oral agreements do not strictly fall within the domain of the Adjudicating Authority / the Appellate Tribunal in accordance with Code. As such, the oral agreements, although legally and may be also enforceable in normal cases, however this cannot be allowed in present case where different experts including two different sets of Chartered Accountants did not verify the veracity of the claims bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncial 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, it is observed that vendors have claimed that APFPL did not make any or partial supplies out of some of consignment sent for packing lying at APFPL premises. On asking for further documents for substantiating their claims, we observe that: I. There was no communication between any of the vendors with Amira Pure Food Pvt Ltd demanding the reason for holding up the stocks or not executing the job work or asking for return of consignment from APFPL II. Despite the earlier consignment partial or full held by APFPL, the vendors kept on sending goods to APFPL for packing and export. On enquiring the same, no satisfactory response received. III. The vendors have not provided any of the confirmation f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 have claimed 58.94 MT of rice which comprises of 16.94 MT withheld by APFPL and 42 MT export returned rice a) The vendor has submitted that there is no formal written agreement for these services and job work charges thereon and also no financial transaction has been accounted for in the books including in inventory records and has contravened the provisions of GST Income tax provision. b) Out of consignments so delivered, APFPL withhold 16.94 MT of rice during February 2018 and in spite of this holding, the vendor continued to supply till 11.05.2018. c) All these supplies of 318.65 MT was exported to AMIRA, USA, Germany and to TGG Australia. Out of this 44% of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. 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 shipment at Amira premises in these circumstances where APFPL had no fault of consignment rejection has not been properly explained with logical reason. e) It is noted that the vendor has exported 2 consignment of 42 MT each total valued at INR 67.17 Lacs and 4 consignment of 42 MT total valued INR 137.76 Lacs to AMIRA GMBH Germany on 21.03.2018 and 16/23.04.2018 which have remained unpaid. Out of this 2 consignment of 84MT for INR 67.07 Lacs were reversed on 03.07.2019 by passing an entry as export sales return for which no explanation provided. Status and accounting of these stocks In books has also not been explained. An amount of INR 137.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hholding 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 to TGG Australia and some other importers. Out of total exports by SKG, 64% of supplies were made to subsidiary/associate companies of APFPL only. e) It is noted that the vendor has exported 8 consignment total valued at INR 439.07 Lacs to AMIRA GMBH Germany from 19.03.2018 to 21.07.2018 which have remained unpaid. Out of this 2 consignment valued for INR 67.07 Lacs were reversed on 03.07.2019 by passing an entry as export sales return for which no explanation provided. Status and accounting of these stocks in books has also not been explained. An amount of INR 327.16 Lacs s still outstanding as on 30th September 2020. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. LIMITATIONS AND DISCLAIMER : 1. There are inherent limitations due to non - availability of certain crucial and relevant information from the vendors relating to specified scope of our work. 2. We have relied on the records and documents produced before us and representations as provided by the vendors and we do not certify the authenticity of such transactions. 3. In view of non-availability from Amira Pure Food P Limited of any of the document, confirmation, statement or records pertaining to commercial transaction entered between vendors APFPL, we have relied o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 International Traders and 58.94 MT TLS Mercantile P. Ltd. and total rice claimed to have been identified by the rice expert was 927.69 MT of four Appellants altogether in one single visit by rice expert. We consciously note genuine concerns of the Respondents / Liquidator that such task of identification in few hours of single days looks improbable, very difficult if not impossible and raises issues regarding seriousness and the acceptability of the report. Moreover, as per the Liquidator , the rice expert report did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aken 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 trade practices, even may be on the basis of oral agreements and sometimes in violation of relevant laws like Companies Act, 2013, GST or TDS under Income Tax Act, etc. but to accept the claims of the Appellants at the stage of Resolution and now Liquidation proceedings, the claims have to be real, based on solid documentary evidence and in accordance with law. These cannot be allowed on the basis of indirect or circumstantial or secondary evidence/ documents. 62. Based on above detailed analysis and aft ..... X X X X Extracts X X X X X X X X Extracts X X X X
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