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TMI Blog2025 (1) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... y') in IA. No. 2599 of 2022 in Company Petition No. (IB)-529/MB/2021 wherein the application filed under Section 33 (1) of the Code by the Respondent No. 2 has been allowed and disposed of. 2. M/s Pegasus Assets Reconstruction Private Limited, the Financial Creditor, is the Respondent No. 1 herein, who filed an application being CP (IB) No.529/MB/2021 under Section 7 of the Code for initiating Corporate Insolvency Resolution Process ('CIRP') against Shri Balaji Entertainments Pvt Ltd ("Corporate Debtor") and Respondent No. 2 herein claiming a total default of Rs.35,90,56,629/-. 3. The Financial Creditor (Respondent No. 1) stated that the account of the Corporate Debtor (Respondent No. 2) was classified as Non-Performing Asset ("NPA") on 02.12.2019, with the date of default being 01.06.2019. The Respondent No. 1 further stated that the Corporate Debtor was both a co-borrower and a corporate guarantor under the loan agreement, primarily in relation to a loan extended to Principal Borrower M/s Universal Textile Waterproof Company (India) ("UTWC"). 4. The Appellant stated that on 18.06.2021, SVC Co-operative Bank Limited (SVC Bank), a Multi-State Co-operative Bank registered under t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant submitted that the IRP had distributed the voting share of Pegasus and NKGSB as 79% and 21%. 9. The Appellant submitted that the entire amount claimed had been treated as admitted by the Interim Resolution Professional without any details being provided regarding the verification process. The Appellant contended that the Interim Resolution Professional has demonstrated gross negligence by failing to make any effort to verify or scrutinize the said claims to assess their veracity. The Appellant submitted that the Interim Resolution Professional, upon receiving the order of his appointment, was fully aware of the contest raised by the Appellant before the Adjudicating Authority and yet neglected to undertake a thorough examination of the claims of the Financial Creditors. 10. The Appellant submitted that the mere admission of the application under Section 7 of the Code does not automatically verify the claims of all the financial creditors and necessary exercise of due diligence in the process of verifying the same should have been undertaken by the Interim Resolution Professional. 11. The Appellant submitted that the adjudication of an application under Section 7 of the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in direct contradiction to the fact that the earlier Resolution Professional was functus officio. Furthermore, the Appellant submitted that the minutes of the meetings of the CoC fails to reflect any effort on the part of the CoC or the Resolution Professional to revive the Corporate Debtor. The Appellant further submitted that the minutes of the CoC meetings noted that the company possesses working capital, movable assets, and ongoing projects, yet no tangible steps were taken to utilize these resources to facilitate the revival of the Corporate Debtor. 14. The Appellant submitted that without prejudice to the submissions regarding the existence of the corporate debt and the arbitrary initiation of the Corporate Insolvency Resolution Process by the order of the Adjudicating Authority, it was the duty of the CoC to actively engage in efforts to revive the Corporate Debtor before making a unilateral decision to liquidate. 15. The Appellant submitted that the primary objective of the Code is to the resolution and revival of the Corporate Debtor, with liquidation being considered only as a measure of last resort. The Appellant assailed the Impugned Order which fails to adjudicate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were received by the deadline of 07th July 2022 from any prospective Resolution Applicants in response to Form G published on 22.06.2022. 22. The Respondent No. 1 highlighted that during the third meeting of the CoC on 12.07.2022, it was disclosed that suspended directors of the Corporate Debtor informed that the Corporate Debtor had no assets, raising concerns regarding the physical availability of assets w.r.t., assets mentioned in the last balance sheet. The Respondent No. 1 noted that several issues were faced while conducting asset valuation due to non-availability of details about the Corporate Debtor's assets, which caused reasonable apprehension regarding their existence and manipulation done by the Ex-Promoter/Appellant of the Corporate Debtor. 23. The Respondent No. 1 submitted that at the end of the third CoC meeting, the Resolution Professional sought members' views on whether to issue a fresh Form G or proceed with liquidation, but this decision was deferred to a subsequent CoC meeting. The Respondent No. 1 contended that after considering all facts, the CoC unanimously resolved to liquidate the Corporate Debtor with a 100% vote from its members in the fourt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore 07.07. 2022, may submit the EoI but no EoI was received till the last date of submission on 07.07.2022, from any prospective Resolution Applicant, in response to Form G, published on 22.06.2022. The CoC in its 3rd meeting held on 12.07.2022, was apprised about non-availability of details of the assets of the Corporate Debtor, which causes reasonable apprehension about physical availability of any of the assets of the Corporate Debtor, as mentioned in the last balance sheet (not filed with MCA) received from the Promoters on 02.05.2022. We note that the CoC further appraised the members, about the capital work amounting to Rs. 1.34 Crores, in the financial year 2020, but the promoter directors had not been able to give any explanation about such expenditure. The CoC after considering the aforesaid facts, unanimously resolved to liquidate the Corporate Debtor. The said resolution was passed with 100% votes from the members of CoC. The Resolution Professional filed an application seeking liquidation of Corporate Debtor under Section 33(1) (a), 33(2) and 34(1) of the Code and the Adjudicating Authority, after considering the peculiar facts of the present case, allowed the applicati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Debtor informed the CoC that the Corporate Debtor has no assets. (c) The Respondent No. 1 also brought out that the CoC faced several issues while trying to value the assets of the Corporate Debtor such as non availability of details of the assets of the Corporate Debtor, physical non-availability of any assets of Corporate Debtor in contrast to assets being shown in the last balance sheet received from the ex-promoters of the Corporate Debtor on 02.05.2022. (d) We have also been apprised that capital works amounting to Rs. 1.34 Crores as shown in financial year 2020 could not be explained by the Ex-Promoter Directors of the Corporate Debtor regarding how this money was spent, which according to the Respondent No. 1 and CoC was suspicious act of the Appellant. (e) We have noted from the pleadings as well as from the Impugned Order that there was no likelihood of revival of the Corporate Debtor in absence of any assets of the Corporate Debtor as well as non-availability of records, as such the CoC passed the resolution to liquidate the Corporate Debtor with 100% voting rights. (f) We further note that the Adjudicating Authority, after going through all details of IA, appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. In so far as the writ petition is concerned, it is a part of the judicial record and the ledger account is a part of the accounts maintained by the SVC Co-operative Bank Ltd.; therefore, these documents are required to be taken on record in order to reach to a conclusion as to whether the application filed under Section 7 of the Code, should have been allowed or not. Accordingly, the application is allowed and these documents R/1 (a to d) and R/2 appended with the application are taken on record. ....." ( Emphasis Supplied ) (c) As such, we do not find any merit in the contention of the Appellant. Incidentally, we note that the same Appellant had gone even before the Hon'ble Supreme Court of India, where that Corporate Debtor has pleaded the fact that he has been co-borrower of the loan with the principal borrower UTWC. (IV) The alleged manipulation of record by Financial Creditor. (a) The Appellant conceded that the director of the Corporate Debtor as well as the partners of the principal borrower i.e., UTWC are the same person but argued that the record furnished by them as partners including blank signed papers have been manipulated by the Financial Creditor in fr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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