Hiten R Abhani IRP of Shivshakti Barrels Pvt. Ltd. vs Jaivik Samratsingh Parihar & Anr.

The case is fixed for the pronouncement of the order. The order is pronounced in open Court vide separate sheet.

[PER : DR. MADAN B. GOSAVI, MEMBER (J)]

This application under section 66 read with section 14 of the Insolvency and Bankruptcy Code, 2016 (“IBC, 2016”) is filed by Mr. Hiten R Abhani- the Interim Resolution Professional (“IRP”) of Corporate Debtor- M/s. Shivshakti Barrels Pvt. Ltd., against two Directors of the Corporate Debtor, namely, Mr. Jaivik Samratsingh Parihar and Mr. Prerit Samratsingh Parihar. 2. It is alleged by the IRP/applicant that the respondents, being two Directors of the Corporate Debtor had transferred on 10.03.2021 and 19.03.2021 a sum of Rs. 42,51,563/- from Federal Bank, bearing Account No. 18105500000036 and sum of Rs. 17,11,351/- from Bank of Baroda, bearing Current Account No. 01980200001459 and thereby committed fraudulent transaction within the meaning of section 66 of the IBC, 2016. According to the IRP, the said amount is transferred by the respondents during the period of moratorium declared under section 14 of the IBC, 2016. 3. Both respondents are served with the notice. They appeared and filed the affidavit in reply. They denied the allegation of fraudulent transactions made by the IRP. They explained the transaction in question (in para 8 and 9 of the affidavit in reply). 4. They contended that the money was transferred from the accounts of the Corporate Debtor in a normal course of business to keep the Corporate Debtor’s status as a going concern by making payments to their small suppliers in due course to regulate the business. It is also contended that the payments 4 | P a g e made to the employees and labor contractors for the month of February 2021 are reflected in the accounts of March 2021. According to them, no attempt was made to transfer any money with malicious intentions. To support their explanation, they produced on record copies of the statement of accounts and other details.

We heard learned counsel for the IRP and learned counsel for the respondents. We perused the material on record.

There is no dispute on the factual aspect that on 10.03.2021 a sum of Rs. 42,51,563/- is transferred from the cash credit account, bearing Account No. 18105500000036 of the Corporate Debtor maintained in Federal Bank. It is also not in dispute that on 19.03.2021 a sum of Rs. 17,11,351/- is transferred from the current account, bearing Account No. 01980200001459 maintained by Corporate Debtor in Bank of Baroda.

The question is whether the above transfers can be termed as the fraudulent transaction ?

The respondent explained that the above monies were transferred to its small creditors and employees to keep the status of the Corporate Debtor as MSME and as a going concern.

We have examined the statement of accounts relating to both above transactions. The statement of accounts is relied on by both the IRP as well as respondents. It is not in dispute that from 09.03.2021 to 19.03.2021, a total sum of Rs. 59,62,914/-was transferred to the accounts of various traders or towards payments of salaries of the employees of the Corporate Debtor (Annexure- A-3). There is no evidence to show that any amount is 5 | P a g e transferred in any account of the respondent personally or any related party of the Corporate Debtor. It is not the allegations of even IRP in this application. From 10.03.2021 to 19.03.2021 certain sum of money is transferred and withdrawn from both accounts. However, a careful perusal of the entries therein shows that the amount so transferred or withdrawn, was transferred and withdrawn during the daily course of business of the Corporate Debtor (statement of accounts are annexed as Annexure-5 of the application).

In view of this evidence, it was our query to the learned counsel for the IRP as to why and how the IRP has considered the above transactions as fraudulent ? Learned counsel for the IRP submitted that because all above transactions are made after the Corporate Debtor is admitted in CIRP.

It is not in dispute that on 10.03.2021, the Corporate Debtor is admitted in CIRP and the moratorium under section 14 was declared by this Adjudicating Authority. Annexure-A2, i.e., the postal track consignment report, shows that the order of admission of the Corporate Debtor in CIRP was communicated on 18.03.2021. The respondents have stated that once they received the above order and came to know that the Corporate Debtor is admitted in CIRP, they did not make any transaction from the bank account and there is no dispute to this fact also.

Upon our close scrutiny of the transactions in question show that various amounts of small value are transferred to some of the creditors of the Corporate Debtor. For ready reference, we reproduce summary transactions of both banks’ accounts as below 6 | P a g e (Annexure-5 of application). Those, statements of accounts are undisputed.

It is not the say of the IRP that the respondents have transferred and withdrawn any amount for their personal use or transferred any amount to the related parties.

In the case of Regen Powertech Pvt. Ltd. Vs. Wind Construction Private Limited and Ors. in Company Appeal (AT)

(Ins) No. 349/2022, the Hon'ble NCLAT held that :-

If we apply the above ratio to the facts of this application, we hold that transaction in dispute cannot be called as a “fraudulent transactions” within the meaning of section 66 of the IBC, 2016. Hence, we pass the following orders: