M/S. Reichindia Pharma Limited

Per : Sanjay Puri, Member (Technical)

This is an application filed under Section 10 of Insolvency and Bankruptcy Code, 2016 (IBC, 2016) read with Rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiation of Corporate Insolvency Resolution Process (CIRP) by M/S. Reichindia Pharma Limited (hereinafter referred as ‘Corporate Applicant’ or ‘Company’).

It is averred that the Corporate Applicant was incorporated on 21.08.1995 with CIN No. U24230TG1995PLC021457. Registered its office at Flat No. 403, Concrete Trumphet, H. No. 1-3-85, 85/1, 86 Street No. 4, Habsiguda, and it inter alia was engaged in manufacture of Chemical and Chemical products. Its authorized Share capital and the paid-up capital was of Rs. 7 Crores.

It is averred that in the year 2011, the company had set up a pharmaceutical formulation unit at Bhongir, by availing loans from APSFC and SBI. As the company could not stabilize production for a long term, it had incurred heavy losses. This resulted in the company account becoming NPA and it was unable to revive the operations despite their best efforts.

It is claimed that the Corporate Applicant having no possibility of generating any income to pay dues, under pressure from the financial institutions for repayment of the loans had sold the unit in the month of February, 2022 to repay the loans. The company however has not been able to pay statutory dues amounting to Rs.4,13,52,910 to various Government Departments.

The Corporate Applicant contends that, it was served with a Notice^{11.Pg 60-61 of the Application.} on 19.04.2023 under Section 74 by the Goods and Services Tax (GST) authorities, encompassing Principal Tax amounting to Rs.1,09,23,802 and a penalty of Rs.1,74,27,191 for the Financial Years 2017-2022. Additionally, a Notice^{22.Pg 62-64 of the Application.} dated 28.04.2020 from the Commissioner of Central Tax demanding Rs.25,97,900, and an inquiry email^{33.Pg 65 of the Application.} dated 01.05.2023 from the EPFO seeking Rs.69,14,189 were received.

Furthermore, various Demand Notices^{44.Pg 66-77 of the Application.} were issued under sections 45-C to 45-I of the ESI Act, 1948, by the Employees State Insurance Corporation (ESIC), totaling Rs.15,31,090. The Corporate Applicant also received a Show Cause Notice^{55.Pg 78-80 of the Application.} on 28.04.2023 from the Commercial Taxes Department for Rs.48,900, and as per the Balance Sheet & Income Tax Portal, there is a pending TDS amounting to Rs.14,91,757. The cumulative dues payable to all the concerned Departments aggregate to Rs.4,13,52,910. Hence, the Corporate Applicant has approached this Hon’ble Tribunal, seeking initiation of Corporate Insolvency Resolution Process (CIRP) as it is unable to settle these outstanding dues.

A Special Resolution was passed by the shareholders vide EGM^{66.Extraordinary General Meeting.} dated 24.04.2023 to show that the Syam Sunder Chidara is authorized to initiate the CIRP. Name of Mr. Madasa Kumar^{77.IP Registration No. IBBI/IPA-001/IP-P01590/2019-2020/12465.} has been proposed as Interim Resolution Professional, who vide letter^{88.Pg 16-17 of the Application.} dated 01.05.2023 has conveyed acceptance to the proposal of the Corporate Applicant.

We have heard the Counsel for the Applicant. After considering the submissions and documents placed on record, we find that the Corporate Applicant has filed the present petition only to defeat the statutory dues to various departments. We are of the view that the Applicant has not approached the Adjudicating Authority for resolution of corporate insolvency, but to avoid legal repercussions of the statutory defaults.

The Applicant’s defaults represent a deliberate evasion of statutory dues and involvement in prosecutable offences. A careful examination of this Application reveals that the Corporate Applicant is fraudulently avoiding the payment of various taxes mandated by law, besides avoiding payment of employee dues.

There is clear evasion of Goods and Services Tax (GST), and non-payment of Tax Deducted at Source (TDS), Employees State Insurance Corporation (ESIC), Provident Fund (PF) and Service Tax collected in the names of third parties (i.e. employees etc) and to be paid to the Government.

These acts are violation of Statutory obligations. The present Application is a blatant attempt to avoid paying penalties and interest on the defaulted amounts and also to protect the Corporate Applicants and its promoters/directors from being prosecuted for these offences. The Applicant has filed the instant Application so as to initiate moratorium on the proceedings initiated by various departments.

Here it is useful to refer to the case of Wave Mega City Center Private Limited v/s Rakesh Taneja^{99.Wave Megacity Centre (P) Ltd. v. Rakesh Taneja, 2023 SCC OnLine NCLAT 50} before the NCLAT it was held that

In the present case, the company is now devoid of any assets, and there appears to be no possibility of revival through the Corporate Insolvency Resolution Process (CIRP). The sole purpose of the Corporate Applicant seems to be defrauding Government Authorities. By invoking a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) after defaulting on payments totalling Rs.4,13,52,910, the Application clearly serves purposes other than insolvency resolution. Consequently, this Petition made under Section 10 is rejected.

The Corporate Applicant is to show-cause why action under section 65 of Insolvency and Bankruptcy Code, 2016 is not taken against it. Registry to list the matter on 08.05.2024 for further hearing on this aspect.