M/s SSMP Agro Export Private Limited & Ors. vs Mr. Yogesh Sethi & Ors.

INDEVAR PANDEY, MEMBER (T)

The present appeal has been preferred under Section 61 of the Insolvency and Bankruptcy Code, 2016, assailing the order dated 14.11.2024, as subsequently modified by order dated 20.12.2024, passed by the Ld. National Company Law Tribunal, Delhi Bench-III, (Adjudicating Authority) in I.A. No. 3827 of 2022 filed in C.P. (IB) No. 495 (ND) 2017. By the impugned orders, the Ld. Adjudicating Authority directed the Appellants, namely M/s SSMP Agro Export Private Limited/Appellant No.1, Mr. Sagar Kunwar/Appellant No.2 and Mr. Shrey Kunwar/Appellant No.3, to deposit a sum of ₹ 1.00 crore along with interest @15% per annum into the liquidation estate of the Corporate Debtor through Mr. Yogesh Sethi/Respondent No.1 and Liquidator of M/s SSMP Industries Ltd. (Corporate Debtor). The said direction was based on the finding that an alleged agreement to sell dated 13.12.2019 for a property of Corporate Debtor (CD) was genuine and that the amount of Rs.1.00 crore received by the appellant no. 1, constituted part of the sale consideration of land belonging to the Corporate Debtor.

The appellants have raised serious disputes regarding the authenticity of the document; absence of any adjudication on forgery; and non-appearance of the alleged purchasers, Sri A. Ravindra Naidu/Respondent No.6 and Sri V. Kamalapathi Naidu/Respondent No.7, before the Ld. NCLT. They further state that the said amount stood consistently reflected in the books of the Appellant as an unsecured investment. Aggrieved by the exercise of jurisdiction against third parties and the consequential civil liability fastened upon them without trial, the present appeal has been filed.

The brief facts of the case are as given below:

The Corporate Insolvency Resolution Process (CIRP) of the Corporate Debtor, M/s SSMP Industries Ltd., was initiated pursuant to admission of a petition under Section 9 of the Insolvency and Bankruptcy Code, 2016, in CP (IB) No. 495(ND)/2017, by the Ld. National Company Law Tribunal, Delhi, on 27.08.2018. Mr. Mohan Lal Jain was appointed as the Resolution Professional.

The Adjudicating Authority, by order dated 31.07.2019 passed under Section 33 of the Insolvency and Bankruptcy Code, 2016, ordered the liquidation of the Corporate Debtor and Respondent No. 1, Mr. Yogesh Sethi, was appointed as the Liquidator. The assets of the Corporate Debtor included, inter alia, mortgaged land situated at Chittoor, bearing Survey No. 242/1-3 and measuring 9.56 acres.

The Appellant No.1, M/s SSMP Agro Export Private Limited, was incorporated on 10.07.2019 by Appellant Nos.2 and 3, Mr. Sagar Kunwar and Mr. Shrey Kunwar, respectively as a start-up venture in the agro-export sector, drawing upon their family’s long-standing involvement in fruit pulp and concentrate processing across Andhra Pradesh, Tamil Nadu, and Karnataka.

The Appellants, namely M/s SSMP Agro Export Private Limited, Mr. Sagar Kunwar and Mr. Shrey Kunwar, have no operational, managerial, or financial connection with the Corporate Debtor M/s SSMP Industries Ltd., except for the fact that Respondent No.2, Mr. Manoj Kunwar, Ex-Director of the Corporate Debtor, is the father of Appellant Nos.2 and 3, Mr. Sagar Kunwar and Mr. Shrey Kunwar.

The family of Appellant Nos.2 and 3, Mr. Sagar Kunwar and Mr. Shrey Kunwar, had been associated with M/s DBA Enterprises LLP, a partnership firm engaged in fruit pulp marketing, which later formed part of a proposed restructuring and merger strategy.

The appellant submitted that the Respondents No.6 and 7, namely Sri A. Ravindra Naidu and Sri V. Kamalapathi Naidu, approached Appellant Nos.2 and 3, Mr. Sagar Kunwar and Mr. Shrey Kunwar, with a proposal to establish a new agro-export start-up, promising total funding of Rs.6.00 crore, facilitation of government grants, and eventual merger of M/s DBA Enterprises LLP with Appellant No.1, M/s SSMP Agro Export Private Limited.

M/s SSMP Agro Export Private Limited, passed a Board Resolution authorising capital infusion on 12.08.2019. Pursuant thereto, an amount of Rs.1.00 crore was received by the Appellant No. 1 by RTGS in two tranches of Rs. 50 lakh each from Respondents No.6 and 7, Sri A. Ravindra Naidu and Sri V. Kamalapathi Naidu, on 13.12.2019 to commence operations.

The appellant stated that the said amount of Rs.1.00 crore was consistently reflected in the statutory books, audited balance sheets, and ROC filings of the Appellant No.1, M/s SSMP Agro Export Private Limited, as an unsecured loan from the financial year 2019-20 onwards, without any reference to a sale transaction or linkage with the Corporate Debtor M/s SSMP Industries Ltd.

No further infusion of Rs. 5.00 crore and facilitation of government funding, assured by Respondents No.6 and 7, Sri A. Ravindra Naidu and Sri V. Kamalapathi Naidu, happened thereafter.

As part of the proposed business integration, the operational business of M/s DBA Enterprises LLP was formally transferred by Respondent No. 5, Smt. Brijkishori Devi, on 30.07.2020 to Appellant Nos.2 and 3, Mr. Sagar Kunwar and Mr. Shrey Kunwar, during July 2020.

On 09.06.2022, Respondent No.1, Mr. Yogesh Sethi, Liquidator of the Corporate Debtor M/s SSMP Industries Ltd., received a legal notice from the counsel of Respondents No.6 and 7, Sri A. Ravindra Naidu and Sri V. Kamalapathi Naidu, alleging for the first time that an agreement to sell dated 13.12.2019 existed between the Corporate Debtor and Respondents No. 6 and 7 for sale of land measuring approximately 9.56 acres situated in Chittoor District for a total consideration of Rs. 6,59,52,000/-.

It was stated in the said notice that Rs.1.00 crore paid to the Appellant No.1, M/s SSMP Agro Export Private Limited, constituted part of the sale consideration of land belonging to the Corporate Debtor, purportedly at the instance of Respondent No.2, Mr. Manoj Kunwar, despite the Appellant not being the owner of the land.

After examining papers on record, the Respondent No.1, Mr. Yogesh Sethi, filed I.A. No. 3827 of 2022 under Sections 33(5), 33(1), 66 and 60(5) of the Code, stating that the said Rs. 1 crore constituted sale consideration under an Agreement to Sell dated 13.12.2019 in respect of the Chittoor land before the Ld. NCLT on 11.08.2022 seeking directions against the Appellants, namely M/s SSMP Agro Export Private Limited, Mr. Sagar Kunwar and Mr. Shrey Kunwar, to deposit Rs. 1.00 crore with interest into the liquidation estate.

On 31.08.2022, the Ld. NCLT restrained Respondents No.6 and 7, Sri A. Ravindra Naidu and Sri V. Kamalapathi Naidu, from enforcing the alleged agreement. Throughout the proceedings before the Ld. NCLT, Respondents No.6 and 7, Sri A. Ravindra Naidu and Sri V. Kamalapathi Naidu, never appeared nor produced corroborative evidence beyond the disputed document.

The Respondent No. 6 & 7 however, instituted Civil Suit No. 39 of 2022 for specific performance before the Civil Court at Chittoor on 13.12.2022.

Final arguments in I.A. No. 3827 of 2022, were heard on 05.01.2024, with liberty granted to file written submissions, though due to procedural lapses by the appellants counsel, the written submissions of the Appellants, namely M/s SSMP Agro Export Private Limited, Mr. Sagar Kunwar and Mr. Shrey Kunwar, were not taken on record.

By the impugned order dated 14.11.2024, the Learned NCLT declared the Agreement to Sell void, restrained Respondents Nos. 8 and 9 from enforcement, and directed the Appellants and Respondents Nos. 1-3 to deposit Rs.1 crore with interest @ 15% per annum, followed by a clerical modification dated 20.12.2024.

Submissions of the appellant are as below:

Ld. Counsel for the Appellants respectfully submits that the present appeal has been filed challenging the impugned orders dated 14.11.2024 and 20.12.2024 passed by the Learned National Company Law Tribunal, Delhi Bench-III, in IA-3827/2022 in CP (IB) No. 495(ND)/2017, whereby the Learned Adjudicating Authority directed the Appellants to deposit an amount of Rs. 1 crore along with interest at the rate of 15% per annum into the liquidation estate of the Corporate Debtor. Ld. Counsel submits that the Appellants are third-party entities and their directors, who have no connection with the Corporate Debtor, and the amount in question was received as an independent investment transaction, wholly unrelated to the Corporate Debtor or its liquidation estate. Ld. Counsel further submits that the Learned NCLT exceeded its jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 by presuming the validity of a disputed Agreement to Sell dated 13.12.2019, ignoring the Appellants’ submissions, and directing recovery from third parties without any nexus to the Corporate Debtor. It is further submitted that invocation of Section 66 of the Code is wholly misconceived in the absence of any pleading or proof of fraudulent intent. The impugned orders, therefore, deserve to be set aside.

Ld. Counsel submits that the Adjudicating Authority’s direction against the Appellants, who are third-party entities, is wholly without jurisdiction. Section 60(5) of the Code limits the jurisdiction of the NCLT to matters arising out of or in relation to the insolvency or liquidation of the Corporate Debtor. The Rs. 1 crore received by Appellant No. 1 was an independent investment transaction post-liquidation and had no connection with the Corporate Debtor. He places reliance upon Judgment of Hon’ble Supreme Court in ‘Anuj Jain v. Axis Bank Ltd.’ [(2020) 8 SCC 401] and ‘Gujarat Urja Vikas Nigam Ltd. v. Amit Gupta’, [(2021) INSC 163] which clearly restrict the NCLT’s jurisdiction to the debtor’s assets and creditors. The impugned direction thus constitutes a jurisdictional overreach. The alleged agreement dated 13.12.2019 is a fabricated document and is otherwise void-ab-initio and has no effect what-so-ever.

Ld. Counsel submits that Section 66 of the Code mandates proof of intent to defraud creditors. The Liquidator’s case rests solely on a disputed Agreement allegedly produced by Respondents Nos. 8 and 9, who deliberately failed to appear before the Learned NCLT. There is no averment or document demonstrating dishonest intent on the part of the Appellants. Ld. Counsel relies on ‘Balwant Rai Saluja & Anr. v. Air India Ltd. & Ors.’ [(2014) 9 SCC 407] to submit that piercing of corporate veil is impermissible without cogent proof of fraud. The Appellants have consistently recorded the amount as unsecured debt since 2019, and no material links it to the Corporate Debtor.

Ld. Counsel submits that allegations of forgery involve complex questions of fact requiring trial and expert evidence, falling within the jurisdiction of civil courts. The Learned NCLT exceeded its summary jurisdiction by adjudicating upon alleged forgery and agreement validity. Further, fraudulent transaction under Section 66 requires proof of intent, which has not been established.

Ld. Counsel submits that by directing deposit of Rs.1 crore into the liquidation estate, the Learned NCLT has extinguished the Appellants’ legitimate claims for damages, interest, and business loss against Respondents Nos. 8 and 9 (Respondents Nos. 6 and 7 in this appeal). Notably, Respondents Nos. 8 and 9 have never issued any demand notice or instituted any proceedings for refund. The impugned order grants them an unjust windfall and allows them to benefit from their own wrong.

Ld. Counsel submits that the imposition of 15% interest is unsupported by any contract, statute, or regulation. The Insolvency and Bankruptcy Code does not permit speculative interest on third-party transactions unrelated to the Corporate Debtor. Interest under the Code must arise from debtor liabilities, not independent investments.

In view of the above, Ld. Counsel for the Appellants respectfully prays that this Hon’ble Appellate Tribunal may be pleased to set aside the impugned orders dated 14.11.2024 and 20.12.2024 passed in IA-3827/2022, declare that the amount of Rs. 1 crore is unrelated to the liquidation estate of the Corporate Debtor, and award costs in favour of the Appellants.

Submissions of Respondent No.1 are as below:

Ld. Counsel for the Respondent No. 1, the Liquidator of SSMP Industries Ltd., submits that the present appeal has been preferred by the Appellants seeking to assail the well-reasoned order dated 14.11.2024 passed by the Learned Adjudicating Authority, whereby the Appellants and the suspended directors of the Corporate Debtor were directed to deposit an amount of Rs. 1 Crore along with interest @ 15% per annum into the liquidation estate. It is submitted that the impugned order has been passed after a detailed examination of the factual matrix and the statutory framework under the Insolvency and Bankruptcy Code, 2016, particularly Section 66 thereof, and does not warrant any interference by this Hon’ble Appellate Tribunal.

The Respondent submits that the appeal is a clear attempt by the Appellants to escape the consequences of their fraudulent conduct, which stands fully established from the record, including the admitted execution of an Agreement to Sell with respect to a liquidation asset and the receipt of Rs. 1 Crore without any authority of law during the liquidation period.

Ld. Counsel for the Respondent submits that SSMP Industries Ltd., the Corporate Debtor, was promoted by Mr. Manoj Kunwar and Mrs. Anupama Kunwar and was engaged in the business of export of mango pulp. The Corporate Debtor was admitted into Corporate Insolvency Resolution Process under Section 9 of the Insolvency and Bankruptcy Code, 2016 by the Learned Adjudicating Authority on 22.08.2018. At the time of commencement of CIRP, the Board of Directors of the Corporate Debtor comprised Mr. Manoj Kunwar, Mr. Surender Kumar and Mr. Dhananjay Kumar, with Mr. Manoj Kunwar being the alter ego and controlling mind of the Corporate Debtor.

It is submitted that during the CIRP, the Resolution Professional caused a special audit, the report of which was submitted on 18.03.2019. The said audit unearthed serious financial irregularities, including the submission of two separate balance sheets for the same financial year 2015–2016, one reflecting a profit of Rs. 15,41,157/- and the other reflecting a loss of Rs. 3,00,33,676/-. The audit further revealed that assets worth Rs. 2.39 Crores were sold by Mr. Manoj Kunwar, both prior to and subsequent to the commencement of CIRP, and that destruction of stock worth Rs. 8.5 Crores was falsely declared.

These facts clearly demonstrate systematic manipulation of accounts and diversion of assets with the intent to defraud creditors, laying the foundation for the subsequent proceedings under Section 66 of the Code.

Ld. Counsel for the Respondent submits that owing to the failure of CIRP, the Learned Adjudicating Authority passed an order dated 31.07.2019 directing liquidation of the Corporate Debtor. The liquidation estate included, inter alia, an immovable property bearing Survey No. 242/1242/2242/3 situated at Gundlakattamanchi, Bangarupalem Mandal, Chittoor District, Andhra Pradesh, admeasuring 9.56 acres and mortgaged with Oriental Bank of Commerce (now Punjab National Bank), which has been consistently referred to as the “Scheduled Property”. The liquidation estate also included a BMW car bearing registration number UP-16-AX-8151, debtor receivables and intellectual property rights.

It is submitted that during the liquidation process, the BMW car was lawfully e-auctioned on 10.09.2021 for an amount of Rs. 15.85 Lakhs. However, despite the liquidation having commenced on 31.07.2019, Mr. Manoj Kunwar, acting through his mother, Smt. Brij Kishori Devi, instituted arbitration proceedings with respect to the immovable properties, including the Scheduled Property. These proceedings were stayed by the Learned Adjudicating Authority by order dated 17.03.2021 upon an application moved by the Liquidator, thereby affirming the exclusive jurisdiction of the Adjudicating Authority over liquidation assets.

Ld. Counsel for the Respondent submits that SSMP Agro Exports Private Limited, Appellant No. 1 herein, was incorporated after the commencement of CIRP of the Corporate Debtor. The said company was promoted by the two sons of Mr. Manoj Kunwar and was engaged in a business identical to that of the Corporate Debtor, as is evident from the family tree placed on record.

It is submitted that on 13.12.2019, during the subsistence of liquidation, Mr. Manoj Kunwar, without any authority of law and in complete violation of the provisions of the IBC, entered into an Agreement to Sell with respect to the Scheduled Property in favour of Respondent Nos. 6 and 7 and received an advance of Rs. 1 Crore through RTGS in favour of SSMP Agro Exports Private Limited. The details of the said payment are expressly recorded in the Agreement to Sell itself, copies whereof form part of the appellate record.

The Liquidator became aware of this illegal transaction only upon receiving a legal notice dated 09.06.2022 from the alleged purchaser. Upon request, copies of the Agreement to Sell and proof of payment were provided to the Liquidator. Thereafter, the Liquidator was constrained to file an application under Section 66 read with Section 60(5) of the Insolvency and Bankruptcy Code, 2016, which came to be numbered as I.A. No. 3827 of 2022.

Ld. Counsel for the Respondent submits that Mr. Manoj Kunwar filed a reply to I.A. No. 3827 of 2022 contending that the claim of the Liquidator was baseless and alleging that the purchaser had entered into a fraudulent transaction to recover Rs.1 Crore. Significantly, while raising such contentions, Mr. Manoj Kunwar did not deny the execution of the Agreement to Sell.

It is further submitted that Appellant Nos. 2 and 3 did not file any reply to the application, but filed written submissions before the Learned Adjudicating Authority, contending that they were not signatories to the Agreement to Sell, that the principle of limited liability and separate legal personality of a company protected them, and that receipt of Rs. 1 Crore under the Agreement to Sell was denied. These defences were examined and rejected by the Learned Adjudicating Authority after appreciating the factual record.

Ld. Counsel for the Respondent submits that the Appellants have raised entirely new and contradictory pleas before this Hon’ble Appellate Tribunal by way of an additional affidavit dated 12.03.2025. It has now been claimed that the amount of Rs. 1 Crore was received as initial funding and shown as an unsecured loan in the books of account, a plea never taken before the Learned Adjudicating Authority.

It is further alleged for the first time that the signatures of Respondent No. 2 on the Agreement to Sell are forged and that a Memorandum of Understanding dated 12.12.2023 was executed by Mr. Manoj Kunwar, which was conspicuously absent from the pleadings filed before the Adjudicating Authority. It is also claimed that no allotment of shares was ever made by Appellant No. 1, which itself runs contrary to Section 62 of the Companies Act, 2013.

Ld. Counsel submits that these mutually destructive stands clearly establish a fraudulent design and collusion between the Appellants and the suspended directors of the Corporate Debtor, including Mr. Surender Kumar and Mr. Dhananjay Kumar, thereby reinforcing the findings recorded in the impugned order.

Ld. Counsel for the Respondent submits that the Learned Adjudicating Authority, by the impugned order dated 14.11.2024, after detailed consideration of the pleadings and evidence, rightly directed all three suspended directors of the Corporate Debtor and the Appellants to deposit Rs.1 Crore along with interest @ 15% per annum into the liquidation estate. The said direction flows directly from the statutory mandate of the Insolvency and Bankruptcy Code and is fully justified in law.

Ld. Counsel for the Respondent submits that Section 36(2) of the Insolvency and Bankruptcy Code, 2016 clearly defines the liquidation estate, and there is no dispute whatsoever that the Scheduled Property formed part of the liquidation estate. Any dealing with such property without authority of the Liquidator is void ab initio.

It is further submitted that Section 66 of the Code empowers the Adjudicating Authority to pass appropriate orders against persons who are knowingly parties to fraudulent transactions carried out during CIRP or liquidation with intent to defraud creditors. The execution of the Agreement to Sell dated 13.12.2019 and receipt of Rs. 1 Crore without any authority during liquidation squarely satisfy all ingredients of Section 66, leaving no infirmity in the impugned order.

Ld. Counsel for the Respondent places reliance on the judgment of the Hon’ble Supreme Court in ‘Piramal Capital and Housing Finance Ltd. (formerly Dewan Housing Finance Corporation Ltd.) v. 63 Moons Technologies Ltd. & Ors.’, reported as 2025 SCC OnLine SC 690, particularly paragraph 50, which affirms the powers of the Adjudicating Authority in dealing with avoidance and fraudulent transactions.

Reliance is also placed on the judgment of this Hon’ble Appellate Tribunal in ‘SMBC Aviation Capital Ltd. & Ors. v. Interim Resolution Professional of Go Airlines (India) Ltd. & Anr.’, reported as (2023 SCC OnLine NCLAT 230), paragraph 32, which reiterates that transactions undertaken without authority during insolvency proceedings are liable to be set aside and appropriate restitution ordered.

Submissions of Respondent No.2 are as below:

Ld. Counsel for Respondent No.2 in his opening remarks submits that by way of the Impugned Orders, the Learned NCLT has travelled far beyond the scope of its jurisdiction inasmuch as it has, firstly, adjudicated serious allegations of forgery and fabrication in a summary proceeding under the Insolvency and Bankruptcy Code, 2016, and secondly, granted reliefs which were never prayed for in the underlying application. It is submitted that the Learned NCLT also gravely erred in directing the Appellants as well as the Answering Respondent to refund amounts allegedly received under a forged and fabricated Agreement to Sell, thereby conferring unintended legal sanctity upon a document that is fundamentally void and fraudulent.

At the outset, Ld. Counsel submits that the Answering Respondent has independently preferred an Appeal assailing the very same Impugned Orders, bearing Filing No. 9910110007232025, which is presently pending consideration before this Hon’ble Tribunal. The contents and grounds raised therein are reiterated and not reproduced herein for the sake of brevity

Ld. Counsel for Respondent No. 2 submits that the Learned NCLT completely failed to appreciate that the purported Agreement to Sell dated 13.12.2019 is a forged and fabricated document, created at the behest of Respondent Nos. 6 and 7. It is submitted that Respondent Nos. 6 and 7 illegally affixed forged signatures of the Answering Respondent on the said Agreement, falsely portraying him as a consenting party to the transaction.

Ld. Counsel clarifies that Respondent Nos. 6 and 7 had initially proposed to infuse an amount of Rs. 6,00,00,000/- as investment into SSMP Agro Export Private Limited, a company distinct and separate from the Corporate Debtor. Towards part performance of the said proposed investment, Respondent Nos. 6 and 7 paid a sum of Rs. 1,00,00,000/- to SSMP Agro Export Private Limited. However, owing to the outbreak of Covid-19 and the subsequent withdrawal of Respondent Nos. 6 and 7 from the remaining investment, the said company suffered acute financial distress.

Ld. Counsel submits that taking advantage of the aforesaid situation, Respondent Nos. 6 and 7, in collusion with Respondent No. 1, devised a deliberate and calculated scheme to illegally usurp a valuable immovable property belonging to the Corporate Debtor, which is primarily owned by the Answering Respondent. To effectuate this unlawful design, a forged Agreement to Sell was fabricated, falsely implicating the Answering Respondent.

Ld. Counsel emphatically submits that the Answering Respondent never executed, signed, or consented to the said Agreement to Sell at any point of time. The signatures appearing on the purported Agreement are forged, which is evident from a bare comparison with the admitted signatures of the Answering Respondent on official and contemporaneous documents.

Ld. Counsel submits that the Answering Respondent became aware of the existence of the forged Agreement only upon receipt of a legal notice dated 09.06.2022, wherein Respondent Nos. 6 and 7 demanded execution of a Sale Deed on the basis of the said fabricated document. The Answering Respondent immediately and unequivocally denied the allegations and issued a detailed reply dated 06.07.2022, categorically refuting the execution of any such Agreement and cautioning Respondent Nos. 6 and 7 against relying upon the same.

Ld. Counsel further submits that despite the explicit denial, Respondent No. 1, acting in his capacity as Liquidator, maliciously relied upon the forged Agreement and filed the same before the Learned NCLT in I.A. No. 3827 of 2022, seeking recovery of Rs. 1,00,00,000/- from the Appellants and the suspended directors, including the Answering Respondent. It is submitted that Respondent No. 1 was fully aware that the said amount was never received by the Answering Respondent and pertained solely to an independent transaction involving SSMP Agro Export Private Limited.

Ld. Counsel submits that the deliberate reliance upon a forged document by Respondent No. 1, in collusion with Respondent Nos. 6 and 7, amounts to a clear criminal conspiracy aimed at misleading the Learned NCLT. Aggrieved thereby, the Answering Respondent was constrained to file a criminal complaint dated 20.03.2025 before Police Station Sarita Vihar, New Delhi, detailing the offences of forgery, fabrication, and fraudulent use of documents.

Ld. Counsel submits that the Learned NCLT gravely exceeded its jurisdiction by adjudicating upon serious allegations of forgery and fabrication, which by their very nature require detailed examination of evidence, expert opinion, and trial, and cannot be determined in summary insolvency proceedings.

Ld. Counsel submits that it is a settled position of law, as consistently held by the Hon’ble Supreme Court and this Hon’ble Appellate Tribunal, that allegations involving forgery, coercion, manipulation, or fabrication of documents must be adjudicated by a competent civil court or criminal forum and not by the NCLT in exercise of summary jurisdiction under the IBC.

Ld. Counsel places reliance on the judgments of this Appellate Tribunal in ‘Satori Global Limited & Anr. v. Shailja Krishna & Ors.’ [2023 SCC OnLine NCLAT 249] and ‘Shelendra Kumar Sharma v. DSC Limited’ [2019 SCC OnLine NCLAT 1274], wherein it has been categorically held that disputes involving allegations of forged or fabricated documents cannot be decided by the NCLT and must be relegated to appropriate forums.

Ld. Counsel submits that despite explicit pleadings and material demonstrating forgery, the Learned NCLT proceeded to adjudicate the issue and even directed refund of monies, thereby indirectly validating a forged document, which renders the Impugned Orders patently illegal and unsustainable.

Ld. Counsel submits that the Learned NCLT committed a jurisdictional error by granting reliefs which were never prayed for. A bare perusal of I.A. No. 3827 of 2022 would reveal that the Liquidator sought only a declaration that the Agreement to Sell is void.

Ld. Counsel submits that despite the limited prayer, the Learned NCLT directed refund of Rs. 1,00,00,000/- and further directed execution of a private sale in favour of Respondent Nos. 6 and 7 for the remaining consideration of Rs. 5,00,00,000/-, a relief wholly dehors the pleadings.

Ld. Counsel submits that such grant of relief, in the absence of a specific prayer, is impermissible in law and vitiates the entire order.

Ld. Counsel places reliance on the judgments of the Hon’ble Supreme Court in ‘Desh Raj & Ors. v. Rohtash Singh’ [(2023) 3 SCC 714] and ‘Akella Lalitha v. Konda Hanumantha Rao & Anr.’ [2023 SCC OnLine SC 928], wherein it has been unequivocally held that courts cannot grant reliefs beyond the pleadings.

Ld. Counsel submits that owing to the mala fide and malicious conduct of Respondent No. 1, the Answering Respondent was compelled to file I.A. No. 5634 of 2021 seeking replacement of the Liquidator, which remains pending adjudication before the Learned NCLT.

Ld. Counsel further submits that the objections raised by Respondent No. 1 in the present Appeal are misleading and suppress the material fact that all such objections are already sub judice before the Learned NCLT, including challenges to the Special Audit Report and applications seeking impleadment of the Special Auditor.

Ld. Counsel submits that the pendency of these applications demonstrates that the findings relied upon by Respondent No. 1 lack finality and cannot form the basis of adverse directions against the answering Respondent.

In view of the aforesaid submissions, Ld. Counsel for Respondent No. 2 most humbly prays that the present Appeal be allowed and the Impugned Orders be set aside, in the interest of justice.

We have heard the parties in great detail, gone through voluminous records of the case including written submissions of the Parties.

Before addressing the issues raised by the Appellants and Respondent No. 2, we consider it necessary to place on record the undisputed connections between all parties and entities involved, as these facts form the backbone of the present controversy.

To clearly understand the relationship between the parties and the companies involved, it is necessary to place the family structure, control pattern, and flow of business and funds in a structured manner.

At the top of the structure is Smt. Braj Kishori Devi, who is the mother of Mr. Manoj Kunwar and the grandmother of Mr. Sagar Kunwar and Mr. Shrey Kunwar. She has been associated with the family’s business interests and was connected with M/s DBA Enterprises LLP, a family-run concern engaged in agro and fruit pulp related business. She also holds 8.60 % shares of Corporate Debtor.

Mr. Manoj Kunwar, son of Smt. Braj Kishori Devi, is the promoter and ex-director of M/s SSMP Industries Ltd., which is the Corporate Debtor in the present proceedings. CIRP against M/s SSMP Industries Ltd. commenced on 27.08.2018, and the company was ordered into liquidation on 31.07.2019. Upon commencement of liquidation, all assets of the Corporate Debtor, including the immovable property situated at Chittoor, Andhra Pradesh, became part of the liquidation estate. Mr. Manoj Kunwar is also the father of Appellant Nos. 2 and 3, namely Mr. Sagar Kunwar and Mr. Shrey Kunwar.

As on 31.07.2019, the Corporate Debtor was having total paid up capital of Rs. 1,83,91,500/- consisting of 18,39,150 equity shares of Rs. 10/-each which were held as under:

We can see from the above that out of total 18,39,150 shares of the CD, 18,38,550 shares (99.97%) were held by the family of Sh. Manoj Kunwar/ Respondent No.2. The CD in effect is a family concern of the Respondent No.2.

Mr. Sagar Kunwar and Mr. Shrey Kunwar, the sons of Mr. Manoj Kunwar, are the directors and shareholders of M/s SSMP Agro Export Private Limited, which is Appellant No. 1 in the present appeal. This company was incorporated after commencement of CIRP of the Corporate Debtor and during the pendency of insolvency proceedings. M/s SSMP Agro Export Private Limited carries on business similar to that of the Corporate Debtor, namely agro-export and fruit pulp related activities. The shareholding and control of this company vest entirely with Mr. Sagar Kunwar and Mr. Shrey Kunwar.

Another relevant entity is M/s DBA Enterprises LLP, which was a family-controlled business associated with the Kunwar family and engaged in similar agro-based activities. The operational business of M/s DBA Enterprises LLP was subsequently transferred within the family fold, thereby ensuring continuity of business operations and control among family members.

For clarity, the family structure and control pattern, as emerging from the undisputed record, can be represented as follows:

As regards the Agreement to Sell, the land in Chittoor, which is the transaction in question, it is not disputed that the Agreement to Sell dated 13.12.2019 pertained to immovable property belonging to Corporate Debtor/ SSMP Industries Ltd., which by that time was already under liquidation. It is also not in dispute that a sum of Rs. 1 crore was received by the M/s SSMP Agro Export Private Limited, a company controlled by the sons of the promoter of the Corporate Debtor. The agreement to sale clearly shows the payment was made to the appellant company on the same day (13.12.2019) which is the date of execution of agreement to sale. The property being sold however, belonged to the liquidation estate of the CD. These facts, taken together, clearly establish that the transaction was neither remote nor accidental, but was facilitated through entities and individuals having direct family and financial nexus with the Corporate Debtor.

This factual matrix leaves no doubt that the Appellant Company is a related party of the suspended management of the Corporate Debtor, and that the transaction under scrutiny cannot be characterised as a dealing by an unrelated third party. The absence of formal cross-shareholding between appellant No.1 and CD does not dilute the reality of common family control, continuity of business, and shared economic interest, particularly in the context of insolvency and liquidation proceedings.

Having thus established the undisputed nexus and relationship between all concerned parties and entities, we proceed to examine the conduct of the Appellants in raising allegations of forgery and fraud, and the timing thereof, in the context of the impugned order.

It is an admitted position on record that the Agreement to Sell is dated 13.12.2019. It is also not disputed that pursuant to this Agreement, a sum of Rs. 1 crore was received, by the M/s SSMP Agro Export Private Limited, a company controlled by Mr. Sagar Kunwar and Mr. Shrey Kunwar, the sons of Mr. Manoj Kunwar, the promoter and ex-director of the Corporate Debtor, M/s SSMP Industries Ltd. These facts are not denied by the Appellants.

We note that Agreement to Sell is a vital document giving factual details about the transaction. We now examine the relevant portions of agreement to sell dated 13.12.2019, which is extracted below:

The following points are noted from the sale agreement:

We now take a look at the details of payment made by the vendees. The same are extracted below:

The first document shows the payment of Rs. 50 lakhs made by vendee 1 Sh. A. Ravindra Naidu through RTGS, which clearly shows the UTR No. mentioned in the sale agreement and account mentioned in the sale agreement which belongs to SSMP Agro Exports.

The second document shows the payment of Rs. 50 lakhs by the vendee 2 Sh. V. Kamalapathi Naidu through RTGS transfer. Even though UTR No. is not mentioned in the said document, but the bank account details of receiving party are clearly mentioned, which is the bank account of SSMP Agro Exports.

It is stated in the Agreement to Sell that the aforesaid funds have been transferred to the vendor, which is SSMP Industries Pvt. Ltd. (Corporate Debtor). But the bank account mentioned in the Agreement to Sell is that of SSMP Agro Export Pvt. Ltd. (Appellant No.1)

It is also relevant to note that the Corporate Debtor had already entered CIRP and subsequently entered in liquidation w.e.f. 31.07.2019. The liquidator was in charge of the CD during the period when the aforesaid agreement to sell was executed by the Respondent No.2. At the relevant point of time, Respondent No.2 had no authority to sell or dispose of any asset of the CD which was in moratorium.

The Liquidator, in the course of discharging his statutory duties, examined transactions affecting the liquidation estate and filed I.A. No. 3827 of 2022 before the Learned NCLT questioning the legality of the Agreement to Sell and the receipt of Rs. 1 crore. Even at this stage, while contesting the application before the Adjudicating Authority, the Appellants did not contemporaneously pursue any criminal remedy alleging forgery with urgency or seriousness.

Despite the execution of the Agreement to Sell in December 2019 and receipt of money at that time, no FIR, police complaint, or civil suit alleging forgery or fraud was lodged since 2019 till 12.12.2023. This is significant because, according to the Appellants, the Agreement was forged from the very beginning. If that were so, a reasonable and expected course of conduct would have been to immediately approach the police or a competent court upon discovering the alleged forgery.

From a reading of the police complaint dated 12.12.2023 (Annexure-F), it is clear that the grievance raised therein relates to alleged coercion, intimidation, and forcible extraction of cheque and cash amounts by the accused persons. The complaint refers to offences under Sections 384/386/34 IPC and narrates allegations of threats, forced signatures on a cheque of Rs. 20,00,000, seizure of mobile phones, and removal of cash. Importantly, there is no specific allegation in the complaint that the Agreement to Sell dated 13.12.2019 was forged or fabricated, nor is there any averment stating that the Agreement itself is fraudulent. The complaint does not even refer to the Agreement to Sell as being void, manipulated, or forged. The entire narration is confined to alleged coercive acts on 12.12.2023 and the demand for money. Thus, the police complaint does not contain any explicit assertion that the Agreement of Sale is a forged document, which further weakens the subsequent plea that the Agreement itself is fraudulent.

If the Appellants’ claim of fraud were genuine and bona fide, nothing prevented them from initiating criminal proceedings much earlier—either at the time of execution of the Agreement, at the time of receipt of money, or at least when the Liquidator first questioned the transaction vide letter dated 09.06.2022. The IA No. 3827 of 2022 was filed by the liquidator on 11.08.2022. The appellant, in his reply to IA No. 3827 dated 19.11.2022, in para 5, did not plead fraud about the alleged agreement to sell and only pleaded that these are baseless allegations filed by Respondents No. 6 and 7 to harass the Respondent No. 2 herein.

We are conscious that allegations of forgery are serious and fall within the domain of criminal courts. However, in insolvency proceedings, the conduct of the parties, their timing, and their consistency are crucial factors in evaluating the credibility of such defences. The Adjudicating Authority was not called upon to decide criminal guilt, nor has it done so. It confined itself to examining whether an unauthorised transaction affecting liquidation estate property had resulted in receipt of money which ought to be restored to the estate.

It is also important to emphasise that the impugned order of Ld. Adjudicating Authority does not get into the matter of determination of fraud if any. The Ld. AA proceeded on a simpler and legally correct premise that once liquidation has commenced, no person, whether related or otherwise, can deal with property of the liquidation estate, without authority of the Liquidator. Any money received pursuant to such a transaction cannot be retained, irrespective of whether the underlying document is valid or forged.

Therefore, even if the criminal complaint ultimately results in an independent inquiry or prosecution, it does not dilute the statutory consequence under the Insolvency and Bankruptcy Code. The post-order filing of a criminal complaint cannot be permitted to undermine the liquidation process or to defeat the protection afforded to creditors. Accepting such a course would allow parties to frustrate insolvency proceedings by raising criminal allegations only after adverse orders are passed.

It is also to note here that the appellants have now claimed that the amount of Rs. 1 Crore was received as initial funding and shown as an unsecured loan in the books of account. However, if this was the case, they should have taken this plea before the Adjudicating Authority in the first place. The records on the contrary shows that no such plea was taken by the appellant in their submissions/ reply before the Adjudicating Authority. This plea has been taken for the first time before us. The relevant portion of their submission in Reply to IA No. 3827 has been extracted below:

It can be seen that in their written submissions before the AA, the appellant No. 2 and 3 herein (Mr. Sagar Kunwar and Mr. Shrey Kunwar respectively) have taken a stand that they are not a necessary party to the aforesaid IA and they should be deleted from the array of parties.

The second submission of the appellants in IA 3827 was that they are not a party to the agreement to sell and the receipt of Rs. 1 crore qua the agreement to sell was denied. At no point in their reply did they raise the issue of the amount being paid to the appellant No. 1 in lieu of unsecured loan. This plea was not taken in their submission before the AA. The proceedings before the Ld. AA were conducted on the basis that the amount was received pursuant to the Agreement dated 13.12.2019 concerning the land of the Corporate Debtor. The plea that the amount was merely an unsecured loan appears to have been developed subsequently in this Appellate Forum.

It is true that learned counsel for the Appellants has submitted that the amount of Rs. 1 crore is reflected in their balance sheet as an unsecured loan. However, a mere accounting entry cannot by itself determine the true nature of a transaction. No loan agreement with the creditor, no board resolution, no repayment schedule, no interest clause, and no correspondence have been placed on record to show that the amount was advanced as a genuine unsecured loan. In the absence of supporting documentation, a subsequent book entry cannot override the surrounding facts, which consistently connect the payment with the Agreement to Sell dated 13.12.2019 relating to the Corporate Debtor’s land. Therefore, the plea that the amount was merely an unsecured loan appears to have been developed subsequently in this Appellate Forum.

In view of the above factual sequence and surrounding circumstances, we note that the transaction under question is related party transaction, as CD is a family business of Father, Mother and grandmother of the appellant No. 2 and 3, who are the owners of Appellant No.1. We further note that the allegation of forgery, raised belatedly, lacks credibility at this stage and appears to be an afterthought adopted as a defensive measure. The Learned AA was therefore justified in proceeding on the material before it and in directing restoration of Rs. 1 crore to the liquidation estate in order to safeguard creditor interests.

We will now examine the case laws cited by the Appellants to support their challenge to the impugned order:

We will now examine the judgments cited by the Respondent in the context of the present factual matrix:

In view of the findings above, we do not find any infirmity in the impugned order dated 20.12.2024 passed by the Adjudicating Authority in I.A. No. 3827 of 2022 filed in C.P. (IB) No. 495 (ND) 2017. The appeal is dismissed. Pending I.As, if any, are closed. There shall be no order as to costs.