G. Rathinavelu vs Mr. Shriraam Shekhar & Ors.

Per : Justice Sharad Kumar Sharma, Member (Judicial):

The instant Appeal seeks to challenge the Impugned Order dated 18.10.2024, passed by the learned NCLT, Chennai in IA (IBC)/935(CHE)/2024 in CP(IB)/49(CHE)/2019 by which learned Adjudicating Authority has inter alia, directed the 1^st Respondent, the Resolution Professional (RP) to take possession of the Registered Office of the Corporate Debtor (CD) and directed the Appellant herein to co-operate with 1^st Respondent and to provide all necessary information, so as to complete Corporate Insolvency Resolution Process (CIRP) in two weeks failing which, contempt action will be initiated against the Suspended Director being the Appellant.

Indian Overseas Bank, the 2^nd Respondent filed Section 7 Application against INMA International Limited, the Corporate Debtor (CD). The learned NCLT, Chennai by an Order dated 13.04.2022, admitted the Application by which, the CIRP proceedings stood initiated against the Corporate Debtor. The Suspended Director filed Appeal before NCLAT, Chennai in CA (AT) (CH) (INS) No. 143 / 2022 which was dismissed on 27.06.2023. An Appeal against this Order to Hon’ble Apex Court in Civil Appeal (Diary) No. 29801 of 2023 stood dismissed by an Order dated 22.09.2023. Hence, it is not in controversy that institution of CIRP proceedings against the Corporate Debtor has attained finality.

On initiation of CIRP proceedings and declaration of moratorium under Section 14 of I & B Code, 2016, and appointment of the IRP, the IRP is to take over the management of the affairs of the Corporate Debtor as per Section 17 of the Code. However, the erstwhile management being the two Suspended Directors, failing to get the CIRP order set aside upto the level of Hon’ble Apex Court, filed Contempt Petition before Hon’ble High Court of Madras, alleging violation of Order in WMP No. 33866 OF 2019 in WP No. 33396 of 2019 passed by the Hon’ble High Court on 04.12.2019. The 2^nd Respondent, IOB gave an undertaking that properties of the Appellant and the Corporate Debtor would not be alienated and no 3^rd Party interest would be created. Based on such, the Hon’ble High Court passed the Order that 2^nd Respondent herein, IOB shall maintain the said position until further Orders in the said Writ proceedings.

Thereafter, the RP, the 1^st Respondent started further process in the CIRP. But, the Appellant herein refused to co-operate with him, in the matters of providing the crucial details such as Financial Statements, Income Tax Returns, Fixed Asset Register, Rental Agreements of existing premises, places of business, details of land and building, etc. and in handing over the keys of the Registered premises of the Corporate Debtor. As a consequence, he filed an Application in IA No. 440 / 2023 under Section 19(2) of I & B Code, 2016, praying for directions to the Appellant to extend their fullest co-operation. The learned NCLT vide Order dated 23.03.2023 directed the Appellant and the other Suspended Director to extend fullest co-operation to the RP and provide the details sought for, including handing over the possession of the Registered Office of Corporate Debtor. The same direction was reiterated in person on 25.04.2023. Thereafter, as per statement of RP in his counter to IA No. 935 / 2024, only a small portion measuring 30 Sq.ft. of the said premises, which happens to be situated in a land area of 1 ground and 2352 Sq. ft. with superstructure thereon being Municipal Old Door No. 251, New No. 290, present Door No. 292, Avvai Shanmugam Salai (formerly Lloyds Road), Gopalapuram, Chennai – 600086), was handed over to him on 25.04.2023 evening.

Not satisfied with it, RP / 1^st Respondent filed a Report before the learned Adjudicating Authority alleging non-compliance of its Order dated 23.03.2023. The Suspended Directors filed their Memo of Compliance on 07.07.2023 and an Affidavit on 12.08.2023.

Meanwhile, two Demand Notices under SARFAESI Act was issued by New India Co-operative Bank, the 3^rd Respondent for loan granted to the Appellant in respect of which loan, Office premises of Corporate Debtor has been offered as collateral.

The 1^st Respondent, on 08.12.2023 filed an Application in IA No. 2342/2023 alleging that the said land on which the Registered premises is situated, has been sold to the Appellant vide an unregistered agreement dated 20.01.2021, without securing the sale value, that the Appellant and the other suspended director have siphoned out a total of Rs.22.75 Crores and praying for directions to the Appellant to contribute the said sum of Rs.22.75 Crores.

On 22.03.2024, IA No. 935 of 2024 was filed by the Appellant praying to direct the 1^st Respondent / RP to handover to the Appellant, the vacant possession of the designated portion of the subject premises of whose keys were handed over to him, to the Appellant herein.

The 1^st Respondent filed a Contempt Petition in Company Petition (IBC) No. 5 / 2024 in IA No. 440 / 2023 in IBA/49/2019 under Section 425 of the Companies Act read with Section 60(5) of I & B Code, 2016, read with Rule 11 & 14 of NCLT Rules, praying to punish the Appellant for violating the Order of the learned Adjudicating Authority passed on 25.04.2023.

After hearing the parties the learned Adjudicating Authority passed the Impugned Order in IA No. 935 / 2024 on 18.10.2024, directing RP to take possession of the Registered Office of Corporate Debtor, if necessary with Police assistance and to submit compliance in two weeks. The said order also stated that issue of title to the document will be independently decided by the Competent Court. It also directed the Suspended Director / Appellant to co-operate with RP and provide all necessary information failing which, contempt action will be initiated against him.

The Appellant contends that the alleged Registered premises of the Corporate Debtor is not the property of the CD and that he is the absolute owner of the said property, pursuant to a Registered Deed of Sale dated 15.12.2015, registered as DOC No. 1351 of 2015, with Office of Joint Sub-Registrar-1, District Registrar Office, Chennai Central, that no portion of subject premises has been provided as Security to any of the Creditors of Corporate Debtor, including IOB, that Hon’ble High Court has restrained 2^nd Respondent / IOB from taking any coercive steps against the Appellant and their properties, that the subject premises was provided to New India Co-operative Bank, 3^rd Respondent herein for availing certain Credit facilities that the said 3^rd Respondent has issued two Demand Notice with respect to said property and has effected two separate symbolic possession notice on 01.02.2023 and 06.02.2023 and therefore, the said premises and under symbolic possession of 3^rd Respondent.

He has further stated that the amount due to 2^nd Respondent / IOB is disputed and having passed learned DRT and learned DRAT it is currently under adjudication before Hon’ble High Court and that right of recovery of 2^nd Respondent against CD remains suspended since 04.12.2019. He has stated that he has fully co-operated with the RP / 1^st Respondent as can be seen from the Memos / Affidavits filed before learned NCLT and that despite having no contractual arrangements, he has provided working space to the RP, and that the learned Adjudicating Authority ought to have decided on all the IAs, being IA No. 440 / 2023, IA No. 284 / 2024, IA No. 935 / 2024 and IA No. 2342 / 2023 instead of issuing directions vide the Impugned Order in a piece-meal fashion.

To the above, 1^st Respondent has countered by stating that the Appellant has not at all been co-operative, that he has to approach the learned NCLT at every stage for getting information, that the portion claimed to have been handed over as Registered Office of the Corporate Debtor is more like a store room which can never be a Registered Office of a Company that the said property of land and the building is an extent of 1 ground and 2352 Sq. ft. was originally purchased by CD on 03.03.2024 and that it has been fraudulently transferred to the Appellant, that the said Cheque by which the payment has purportedly been made, has not been shown to be realized in the accounts of CD, that for the same and other such instances of fraud, he has filed an Application before the learned NCLT in IA No. 2342 / 2023 praying for directions to the Appellant to contribute Rs.32.75 Crores to Corporate Debtor and hence, the direction given by the learned NCLT to handover the Registered Office of the Corporate Debtor, cannot be faulted. He has also stated that the action of 3^rd Respondent in initiating action under SARFAESI Act to take symbolic possession of the said property is violative of Section 14 of I & B Code, 2016.

The 3^rd Respondent has contended that he being New India Co-operative Bank Limited has sanctioned a total loan of Rs.11 Crore to the Appellant, against mortgage of said property by way of a Registered Deed dated 15.12.2015, that on account of the loan becoming NPA on 09.03.2022 he has decided to enforce his Security Interest on the said property by issuing notices under Section 13(2) of SARFAESI Act, 2002, seeking repayment of Rs.10.38 Crores with future interest, that he is entitled to take constructive possession of the said property under section 13(4) of SARFAESI Act, that he has asked the Appellant to make the 1^st Respondent to vacate the premises so that he can enforce his Security Interest. 15. The 2^nd Respondent / IOB has contended that the Appellant has challenged the CIRP proceedings right upto Hon’ble Apex Court and has failed, that the Sale Deed transferring the said property to the Appellant is a fraudulent transfer with nominal amount, that no Title Deed has passed on to the Appellant and hence, mortgage in favour of 3^rd Respondent is non-est in law.

Firstly, coming to the direction of Hon’ble High Court of Madras, it has given a very specific direction that the Respondent No. 2, IOB will not resort to any coercive actions as against the Appellant or their properties, in addition to recording the undertaking that the Appellant herein would not dispose off the assets provided as Security to the 2^nd Respondent. The relevant portion of the order passed is extracted hereunder:

By asking the RP to take possession of the Registered Office of Corporate Debtor will not amount to creating any 3^rd Party rights. The status quo with respect to title of the said property is still maintained especially when the learned Adjudicating Authority has categorically stated that the issue of title to the property will be independently decided by the Competent Court.

The documents placed on record by 3^rd Respondent is subsequent to initiation of CIRP against the Corporate Debtor and will be hit by provisions of Section 14 of I & B Code, 2016, after enforcement of moratorium.

The plea of the Appellant in IA No. 935 / 2024 is akin to placing an embargo on CIRP proceedings by referring to action being taken by 3^rd Respondent under Section 14 of SARFAESI Act. This issue has already been dealt by this Tribunal while refusing to entertain the plea to set aside CIRP proceedings in its Order dated 27.06.2023 in CA (AT) (CH) (INS) No. 143 / 2022, where it has been categorically held that the Interim Order in Writ Petition as well as the Contempt Petition are limited to creating an embargo on alienation of property and on further creation of 3^rd Party rights.

From the pleadings it is clear that the Appellants area evasive in giving full co-operation to the 1^st Respondent / RP in not providing Financial Statements and Income Tax Returns which could have helped the RP to locate the Registered Office of the Corporate Debtor and have tried to mislead learned NCLT by developing a cooked up story that they have handed over the Registered Office to the RP which they have not done so far, which in fact can at best be a store room. In additional, no documents except some photographs have been filed which supports the case of the Appellant that he has handed over the possession of the Registered Office premises of the Corporate Debtor to 1^st Respondent / RP.

It is also clear from the Impugned Order of the learned NCLT that the matter is still under consideration and that final decision is yet to be taken in the IAs being IA No. 440 / 2023, IA No. 935 / 2024, IA No. 2342 / 2024 and Contempt Petition Cont. P (IBC) / 5 / 2024 and the next hearing as per the said Order, has been fixed on 17.12.2024, so at best, the Impugned Order is interim in nature, aimed to enable the RP to complete the CIRP in two weeks. This being the case, adjudication with regard to the claim of Appellant that the subject property belongs to him and the claim of 3^rd Respondent that he has mortgage rights over the same is yet to be completed. Thus, for the aforesaid reason, the direction given in the Impugned Order, do not suffer from any apparent error as such, because, handing over of possession of the Registered Office of the Corporate Debtor to the 1^st Respondent / RP is as a consequence of the Order of the CIRP proceedings and its consequential affirmation up to the Hon’ble Apex Court. None of the grounds as agitated by the Appellant in opposition to the Impugned Order are sustainable and supported by any evidence, which could be taken into consideration at this Appellate stage to denounce the observation which has been made in the Impugned Order of 18.10.2024, as rendered in IA (IBC) / 935(CHE) / 2024 in Company Petition (IB) / 49 (CHE) / 2019, since, the direction given to handover the possession being in consonance to the earlier proceedings, do not suffer from any apparent error calling for any inference, thus, the Company Appeal (AT) (CH) (INS) No. 389 / 2024 lacks merit and the same is accordingly dismissed. All pending Interlocutory Applications, would automatically stand disposed of.