C. A. Kizhakkekara Kuriakose Jose vs Jose M. M. & Anr.

The present application has been filed by the Applicant who is the Resolution Professional in the matter of ITMA Hotels India Pvt. Ltd. (hereinafter referred to as "RP") under Section 45(1) and 60(5)(C) of the Insolvency and Bankruptcy Code, 2016 read with Regulation 35(A) of the IBBI (Insolvency Resolution of Corporate Persons) Regulations 2016 and Rule 11 of the NCLT Rules, 2016 seeking the following reliefs: -

The facts as narrated in the application and explained by the RP are summarized hereunder:

On 15.09.2022 the Respondents filed their reply statement and stated that they were the Managing Director and the Director of the Corporate Debtor respectively and were also the promoters of the Corporate Debtor.

They have submitted that Section 45 of the Insolvency & Bankruptcy Code deals with undervalued transactions and its avoidance. For a transaction to be called ‘Undervalued’, the element of Section 45(2) needs to be satisfied and the ‘Relevant Period’ is defined in the subsequent section. Hence, before a transaction is considered undervalued, the constraints need to be satisfied. It should be a gift or it should be for a consideration that is less than the value of consideration Corporate Debtor gets and it should not be in the ordinary course of business.

As Managing Director and Director, the respondents were legally entitled to remuneration or salary. The Corporate Debtor was making One lakh each as remuneration/salary to both the Directors. The same was not paid as a gift to the Respondents, as alleged by the Resolution Professional and the same was also done in the ordinary course of business. This fact is evident from the Balance Sheet for the Financial Year 2015-2016 and the Accounting Ledgers produced with this application.

On 29.08.2022 the Applicant filed a rejoinder and stated that submission of the Respondents that they were the promoter Managing Director and Director of the company proves that they are related to the company and the look-out period in such circumstances is two years before the Insolvency commencement date viz., 01.01.2020 to 31.12.2021. The transaction in the present matter happened on 22.09.2020, 24.09.2020, and 19.05.2021 for Rs 92,500/-, Rs. 92,500/- and Rs. 62,000/- respectively in the case of the 2^nd Respondent and Rs 10,000/- in the case of 1^st Respondent during the Financial Year 2020-2021.

It is further submitted that the transaction did not have the sanction of the Board of Directors. The same was observed in the forensic report. The fact that Respondents were the promoters and directors of the Corporate Debtor gave them an added advantage to make payments without any compliance with the provisions of the Companies Act 2013 in preference over other creditors.

On the petitioner side it is stated that from the Bank account of the corporate debtor a total sum of Rs.2,47,000/- has been transferred to the Bank Account of the 2^nd respondent as below:

Further during the financial year 2020-21 a sum of Rs.10,000/- was paid to 1^st respondent.

On the respondent side admitted the transfer of amount as stated above. The contention of the respondents are the amounts were paid to them towards their salaries and the transactions were taken place in the ordinary course of Business hence the transactions does not come under the undervalued transaction.

When the respondents admit the receipt of amount and put forth the plea that the amounts were paid to them towards their salaries as Directors of corporate debtor, then the burden of proof lies upon them. To substantiate their contention on the respondents side not shown any resolution or documents the monthly remuneration was fixed and paid to the respondents. The Bank accounts shows that a sum of Rs.92,500/- was transferred on 22.09.2020 & another sum of Rs.92,500/-was transferred on 24.09.2020. If the amount paid by the corporate debtor is monthly salary, then how two equal amount payments were made within two days gap, this shows that these amounts were not credited into the account of second respondent as salary. The respondents in their reply stated that they were paid Rs.1,00,000/- as their remuneration by the corporate debtor. If the remuneration of the director is fixed and carried out, it will reflect upon the books of accounts. There is no periodical monthly entry in the accounts of the corporate debtor, showing the monthly salary disbursed to the respondent. In the situation it is proved that the amount transferred into the accounts of respondents are not their salary amount. When it is not proved that the amounts were disbursed to the respondents towards their salaries, the contention of the respondents that the amounts were transferred in the ordinary course of business submission also negatived.

On the respondent side also argued the alleged transactions do not fall under the undervalued transactions under section 45 of IBC 2016. Here the amount of Rs.2,57,000/- was voluntarily credited/transferred into the accounts of respondents, without any consideration, from the accounts of the corporate debtor, this transfer amounts to Gift. As per 45(2)(a) of IBC 2016 even a gift is coming under the Avoidance of undervalued transaction, hence application under section 45 of IBC 2016 is correct.

In these circumstances it is concluded that 1^st Respondent is liable to pay a sum of Rs.10,000/- applicant/Resolution professional to the corporate debtor and 2^nd respondent is liable to pay a sum of Rs. 2,47,000/- to the applicant/resolution professional of corporate debtor as provided under section 48(1)(c) of IBC 2016, consequently the following order is passed.

Thus, this application is ALLOWED.

The Registry is directed to communicate this order to the respective parties through email.

Certified copy of the order be issued on request of the parties as per the procedure.