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Judgment
Justice M. Venugopal, Member (Judicial)
Introduction :
The ‘Appellant’ / ‘Applicant’ has preferred an instant Comp. App. No.361/2022 being aggrieved against the ‘Impugned Order’ dated 01.07.2022 in IA/1147/IB/2020 in IBA/1099/2019, passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai).
The ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai), while passing the ‘Impugned Order’ dated 01.07.2022 in IA/1147/IB/2020 in IBA/1099/2019 (filed by the ‘Appellant’ / ‘Applicant’ under Section 60 (5) of the Insolvency & Bankruptcy Code, 2016) at ‘Paragraph 29 to 34’ had observed the following: -
“29.Thus, there seems to be a stark contrast in relation to Section 66(1) and 66 (2) of IBC, 2016. It is needless to say that even the scope of sub-section (1) and (2) of Section 66 of IBC, 2016 are different. As to the present case, the Applicant sought the Respondents to make contribution to the Corporate Debtor, under Section 66 (2) of IBC, 2016.
30.By keeping in mind the scope of sub-section (1) of Section 66 of IBC, 2016, this Tribunal is required to examine as to whether the transactions as alleged by the Applicant in the present Application against the Respondents would fall within the confine of ‘Fraudulent Trading’ that is to say that whether the business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose. In this context, it is significant to refer to the decision of the Supreme Court, in the matter of Anuj Jain IRP for Jaypee Inrfatech Limited – Vs – Axis Bank Limited Etc., In Civil Appeal No.8512 – 8527 of 2019;
29.1.However, we are impelled to make one comment as regards the application made by IRP. It is noticed that in the present case, the IRP moved one composite application purportedly under Sections 43, 45 and 66 of the Code while alleging that the transactions in question were preferential as also undervalued and fraudulent. In our view, in the scheme of the Code, the parameters and the requisite enquiries as also the consequences in relation to these aspects are different and such difference is explicit in the related provisions. As noticed, the question of intent is not involved in Section 43 and by virtue of legal fiction, upon existence of the given ingredients, a transaction is deemed to be of giving preference at a relevant time. However, whether a transaction is undervalued requires a different enquiry as per Sections 45 and 46 of the Code and significantly, such application can also be made by the creditor under Section 47 of the Code. The consequences of under valuation are contained in Sections 48 and 49. Per Section 49, if the undervalued transaction is referable to sub-section (2) of Section 45, the Adjudicating Authority may look at the intent to examine if such undervaluation was to defraud the creditors. On the other hand, the provisions of Section 66 related to fraudulent trading and wrongful trading entail the liabilities on the persons responsible therefor. We are not elaborating on all these aspects for being not necessary as the transactions in question are already held preferential and hence, the order for their avoidance is required to be approved; but it appears expedient to observe that the arena and scope of the requisite enquiries, to find if the transaction is undervalued or is intended to defraud the creditors or had been of wrongful/fraudulent trading are entirely different. Specific material facts are required to be pleaded if a transaction is sought to be brought under the mischief sought to be remedied by Sections 45/46/47 or Section 66 of the Code. As noticed, the scope of enquiry in relation to the questions as to whether a transaction is of giving preference at a relevant time, is entirely different. Hence, it would be expected of any resolution professional to keep such requirements in view while making a motion to the Adjudicating Authority.
31.From the above judgement of the Hon’ble Apex Court, it is to be noted that specific material fact in relation to the transaction which is sought to be challenged by the Resolution Professional is required to be pleaded in the Application. As to the present case, the Applicant sought to reverse the transactions purported to be done by the Respondents under Section 66 (1) of IBC, 2016.
32.From the averments and from the ingredients extracted supra, it is seen that the Applicant is required to prove the following;
a. The person should knowingly carry on the business with the Corporate Debtor;
b. The said person should have a dishonest intention to defraud the creditors;
33.The Applicant in the present case has miserably failed to prove the dishonest intention of the Respondents to defraud the creditors. Only allegations has been made by the Applicants in respect of the amount which is due and payable by the Respondents and no documentary proof has been filed in support of the same, to show that the business of the Corporate Debtor was carried out by the Respondents with an dishonest intention and to defraud the creditors. Under the said circumstances, the reason given by the respondent appears to be plausible and cannot be brought under Section 66 (1) of IBC, 2016.
34.Hence for the aforestated reasons, we find no merits in the present Application. Accordingly, IA(IBC)/489(CHE)/2021 stands dismissed. No costs.
34.In so far as IA/1147/IB/2020 is concerned it is seen that the said Application has been filed by the Applicant viz. Wind Construction Limited to direct the Respondent to deliver one 1500KW WEC in working condition along with charging certificate issued by CEIG and commissioning certificate issued by TANGEDCO, to the Applicant for which the entire consideration has been paid by the Applicant in the matter of Regen Powertech Private Limited. At present, as already stated the Resolution Plan in respect of the Corporate Debtor has already been approved by this Tribunal vide its order dated 01.02.2022 and the new management is required to take control of the Corporate Debtor. Thus, the Applicant has not made a case of fraud or dishonest intention on the part of the Respondents except making sweeping allegations and hence Section 66 of IBC, 2016 cannot be invoked under such circumstances” and dismissed the ‘Application’, without costs.
Appellant’s contentions:
Challenging the ‘Validity’ ‘Propriety’ and ‘Legality’ of the ‘Impugned Order’ dated 01.07.2022 in IA/1147/IB/2020 in IBA/1099/2019, the ‘Appellant’ / ‘Applicant’ has focused the instant Comp. App. No.361/2022 by submitting that a ‘Contract’ dated 24.01.2018 was executed between the ‘Appellant’ / ‘Applicant’ and the ‘Corporate Debtor’, wherein the ‘Corporate Debtor’ undertook to develop a 49.5 MW Wind Power Project, comprising of ‘33 Wind Energy Converter’ (WEC).
According to the ‘Appellant’, the consideration of ‘1 WEC’ was determined at Rs.8.10 Crore. The ‘Total Consideration’ for ‘33 WECs’ are Rs.267,30,00,000/- + Applicable ‘GST’. The stand of the ‘Appellant’ is that it had made the ‘Full Payment’ for the ‘whole project’ and requires to recover a sum of Rs.24,89,18,879/- from the ‘Corporate Debtor’.
It is the version of the ‘Appellant’ that in terms of the ‘Agreement’, the ‘Corporate Debtor’ had constructed / developed ‘32 WECs’ and handed over the same to the ‘Appellant’ from time to time and that the ‘Corporate Debtor’ is to hand over, ‘1 WEC’ to the ‘Appellant’.
The Learned Counsel for the ‘Appellant’ brings to the notice of this ‘Tribunal’ that the ‘Appellant’, has paid an ‘upfront’, for the consideration of the ‘Corporate Debtor’. In fact, it is the ‘Plea’ of the ‘Appellant’ that it is the ‘absolute owner’ of ‘1 WEC’, which is lying with the ‘Corporate Debtor’ for the purpose of ‘delivering’ the same to the ‘Appellant’. Furthermore, ‘1 WEC’ is not the ‘Asset’ of the ‘Corporate Debtor’, but, it is the ‘Asset’ of the ‘Appellant’. Apart from that, in terms of Clause 5 of the ‘Agreement’, the ‘Appellant’ is entitled for ‘LD” and the said sum is ‘adjustable’ in the ‘balance claim amount’.
The Learned Counsel for the ‘Appellant’ points out that the ‘Respondent’ filed its ‘Counter’ in IA(IBC)/477(CHE)/2021 on 29.04.2022 and in that, has not stated about ‘Status’ of ‘1 WEC’, as to whether it was included in the ‘Assets’ of the ‘Corporate Debtor’ or not.
The Learned Counsel for the ‘Appellant’ comes out with a ‘Plea’ that the ‘Impugned Order’, passed by the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai) in IA/1147/IB/2020 in IBA/1099/2019 dated 01.07.2022 is a ‘non-speaking Order’ and in fact, the ‘Respondent’ could not have included ‘1 WEC’, while valuing the ‘Assets’ of the ‘Corporate Debtor’, since the same belongs to the ‘Appellant’.
It is represented, on behalf of the ‘Appellant’, that the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai) had failed to appreciate that in ‘Paragraph 4 (vi)’ of the ‘Counter’ filed by the ‘Respondent’ in IA/1147/IB/2020 in IBA/1099/2019, the ‘Respondent’ had stated that due to non-payment of Rs.4.81 Crore, 1 of WEC was not handed over to the ‘Appellant’.
The other contention advanced on behalf of the ‘Appellant’ is that the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai) had failed to take into consideration an ‘important fact’ that the ‘Respondent’ is bound by the ‘Terms of Agreement’, entered into by the ‘Corporate Debtor’ with the ‘Appellant’.
The Learned Counsel for the ‘Appellant’ proceeds to point out that as per ‘Terms of Agreement’ Rs.200 Crore to be paid through ‘Letter of Credit’. However, the payment at the request of the ‘Corporate Debtor’ had opened a ‘Letter of Credit’ for Rs.267,68,91,817/- and that an ‘excess sum’ was repaid by the ‘Corporate Debtor’, i.e., Rs.70,82,13,052/-. Besides this, the ‘Letter of Credit’ was opened for further sum of Rs.71,297,645/-.
The fervent ‘Plea’ made on behalf of the ‘Appellant’ is that he had made payment of Rs.267,68,91,817/-, through ‘Letter of Credit’. As per the ‘Terms of Contract’, it is bound to open ‘Letter of Credit’, only for a sum of Rs.200 Crore and according to the ‘Appellant’, it had made an ‘Excess Payment’, to the ‘Corporate Debtor’, which was returned by the ‘Corporate Debtor’.
The Learned Counsel for the ‘Appellant’ submits that as per ‘Clause 5’ of the ‘Agreement’, the ‘Appellant’ is entitled to claim, ‘Liquidated Damages’ from the ‘Corporate Debtor’. Also, that as per Clause 5 (4) of the ‘Agreement’ that the ‘Appellant’ is entitled to ‘set off’ the ‘Liquidated Damages’ from the balance sum, payable to the ‘Corporate Debtor’.
The Learned Counsel for the ‘Appellant’ points out that according to the ‘Resolution Professional’ a sum of Rs.4.81 Crore is only due and payable, which needs to be adjusted against Rs.43,33,35,810/- of the ‘Liquidated Damages’ payable to the ‘Applicant’.
The categorical stand of the ‘Appellant’ is that no amount is due and payable by the ‘Appellant’ and that the ‘Resolution Professional’ has ‘no right to withhold one wind mill’ and in all fairness the same requires to be handed over to the ‘Appellant’.
Appellant’s Decisions: -
The Learned Counsel for the Appellant adverts to the ‘Order’ of the Hon’ble High Court of Delhi dated 26.11.2020 in WP (C ) 8705/2019 and CM APPL. 36026/2019 one M/s. Venus Recruiters Private Limited Vs Union of India and Others wherein at ‘Paragraph 77 to 80’, it is observed as under:-
“77.There is a START line and FINISH line for the Resolution process. Section 23 clearly stipulates that the role of the RP is to ‘manage’ the affairs of the Corporate Debtor ‘during’ the resolution process and NOT thereafter. In fact, until the enactment of the proviso to Section 23, which was introduced with effect from 28th December, 2019, the RP’s mandate concluded with the CIRP. The proviso introduced, firstly in 2018 and thereafter in 2020, merely extended the mandate of the RP till the approval of the Resolution Plan under Section 31(1) or appointment of liquidator under Section 34. This itself makes it amply clear that the RP’s authority is limited in nature and in any event, cannot extend beyond the order passed under Section 31. Thus, there is an outer limit for the functioning of the RP under the proviso to Section 23 (1). The continuation of a RP or filing of an application for the purpose of prosecuting an avoidance application as a ‘Former RP’ is beyond the contemplation of the IBC. The RP ceases to be one after an order under Section 31 is passed. The RP does not have any connection whatsoever with the new Management which takes over the erstwhile Corporate Debtor, after the approval of the Resolution Plan. Any other interpretation could lead to a situation where an RP could be a ‘Former RP’ for years together without any definite end date. Under Section 23, the CIRP period is a specific period and cannot be read as a perpetual period or an indefinite period. The wording of the proviso in fact makes it further clear that the CIRP process in fact comes to an end immediately upon the RP submitting the Plan itself.
78.The IBC was meant to cure the fallacies and shortcomings in the previous legislations wherein winding-up of companies consumed years together leading to erosion of their assets and businesses. The wording of Section 23 clearly lays down the mandate for the RP. The same cannot be extended beyond the contemplation in the statute. After the Resolution Plan is approved and the new management takes over, the manner in which the affairs of the company are to be run is the sole prerogative of the new management. In the statutory scheme, the RP cannot continue to act on behalf of the company under the title of ‘Former RP’. That would be violative of the legislative intention and the statutory prescription. 79. A perusal of Section 30(4) also makes it adequately clear that the CIRP period has to be completed within the time period specified underSection 12(3). Thus, the IBC does not contemplate the continuation of the RP beyond the CIRP period. 80. The above interpretation is also in line with the overall object and purpose of the IBC. The IRP/RP are persons, who are assigned specific roles under the IBC. They are meant to provide a smooth transition for the Corporate Debtor during an insolvency period till the resolution process is over. Their continuation beyond the closure of the resolution process would in effect mean an interference in the conduct and management of the company, which is now having its own independent Board, managerial personnel, etc. The RP’s role cannot continue once the Resolution Plan is approved and the successful Resolution Applicant takes charge of the Corporate Debtor.”
This ‘Tribunal’ has heard the Learned Counsel for the ‘Appellant’, at the stage of ‘Admission’ of the instant Comp. App. (CH) (Ins) No.361/2022.
As seen from the contents of IA/1147/IB/2020 in IBA/1099/2019 filed by the ‘Appellant’ / ‘Applicant’, it is quite evident that the ‘Contract’ dated 24.01.2018 was executed between the ‘Appellant’ / ‘Applicant’ and the ‘Corporate Debtor’, whereby and whereunder, the ‘Corporate Debtor’ undertook to develop a 49.5 MW Wind Power Project comprising of ‘33 Wind Energy Converters (WECs)’.
According to the ‘Appellant’ / ‘Applicant’, the ‘Total Consideration’ for ‘33 WECs’ was Rs.267,30,00,000/-, coupled with the applicable ‘GST’. It is the plea of the ‘Appellant’ that it had made ‘Full Payment’ for the ‘Whole Project’ and it has to recover Rs.37,60,27,895/-from the ‘Corporate Debtor’.
The submission advanced on behalf of the ‘Appellant’ is that ‘32 WECs’ were delivered out of ‘33 WECs’ and ‘1 WEC’ is pending to be handed over, on the part of the ‘Corporate Debtor’. Even if ‘1 WEC’ is not installed, the desired results could not be achieved, as a result of which, the ‘Appellant’ will suffer serious hardship and loss. Furthermore, pending ‘Delivery’ of ‘1 WEC’ is not the ‘Asset’ of the ‘Corporate Debtor’ and hence, the ‘Appellant’ / ‘Applicant’ has filed an IA/1147/IB/2020 in IBA/1099/2019, on the file of the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai), praying for issuance of a ‘Direction’ to the ‘Respondent’ to deliver one 1500 KW WEC, in working condition, along with ‘Charging Certificate’ issued by the CEIG and ‘Commissioning Certificate’ issued by the TANGEDCO.
Before the ‘Adjudicating Authority’, (National Company Law Tribunal, Division Bench – II, Chennai), the ‘Respondent’ / ‘Resolution Professional’ had filed the ‘Reply’, to IA/1147/IB/2020 in IBA/1099/2019, stating that the ‘RPPL’ had entered ‘Supply Contract’, for supply of 49.5 MW comprising ‘33 Wind Mills’ on 24.01.2018, which is a ‘Turnkey Agreement’ for ‘supply’, ‘erection’ and ‘commissioning’ of 49.5 MW with a capacity of 1.5 MW at Onamakulam Village, Tirunelveli. In ‘Terms of the Payment’, if there is any delay in payment, the ‘Corporate Debtor’ is entitled to levy 18% interest per annum, on the sum payable.
From the ‘Reply’ projected by the ‘Respondent’ / ‘Resolution Professional’ to IA/1147/IB/2020 in IBA/1099/2019, it is patently evident that the ‘Corporate Debtor’ had raised ‘Invoices’ to a sum of Rs.286,19,78,856/-, inclusive of ‘GST’. However, as per the ‘Books of the Corporate Debtor’, the ‘Appellant’ / ‘Applicant’ had remitted a sum of Rs.70,82,13,056/-.
It is the stand of the ‘Respondent’ / ‘Resolution Professional’ before the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai) that a sum of Rs.206,90,45,531.50 was brought into both KVB and HDFC Bank Accounts of the ‘Corporate Debtor’. But, a sum of Rs.70,82,13,056/- was retransferred from the KVB Account to the ‘Appellant’ / ‘Applicant’, back to their Current Account (No.041985700000247) maintained at YES Bank Ltd. Therefore, a sum of Rs.136,08,32,475.50 Crore, only actual account received, against the total ‘Invoice’ sum of Rs.286,19,78,856/-.
According to the ‘Respondent’ / ‘Resolution Professional’, the ‘Appellant’ / ‘Applicant’ had not made ‘Full Payment’ and still a sum of Rs.75.63 Crore is due and payable, which is charged to the ‘Creditors’. Added further, the Appellant’s claim for ‘Claim Ownership’, is subject to the ‘Full Payment’ of ‘Whole Consideration’ for the ‘Project’ and as on date, the ‘Appellant’ had failed to pay a sum of Rs.75.63 Crore and, in reality, the ‘Respondent’ has a right to recover the same with 18% interest from the ‘Date of Default’, in terms of the ‘Contract’. Hence, IA/1147/IB/2020 in IBA/1099/2019 filed by the ‘Applicant’ / ‘Appellant’ is not maintainable in ‘Law’.
It cannot be gainsaid that Section 23 of the Insolvency & Bankruptcy Code, 2016, provides for the ‘Role of the Resolution Professional’, to conduct the ‘Corporate Insolvency Resolution Process’ (CIRP), in managing the affairs of the ‘Corporate Debtor’, during the ‘Resolution Period’, and not at a later point of time. No wonder, the ingredients of Section 60 (5) of the Insolvency & Bankruptcy Code, 2016, is not all pervasive Section, showering upon ‘Jurisdiction’ to an ‘Appellate Authority’ to decide any question / issue concerned the ‘Corporate Debtor’.
As far as the present Case is concerned, the ‘Resolution Plan’ was approved by the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai) on 01.02.2022. Taking note of the fact that the ‘Respondent’ / ‘Resolution Professional’ before the ‘Adjudicating Authority’ (National Company Law Tribunal, Division Bench – II, Chennai) had taken a stand that Rs.75.63 Crore is receivable and that the ‘Applicant’ / ‘Appellant’ ought to be directed to pay the said sum immediately and in the teeth of the stand taken by the ‘Respondent’ / ‘Resolution Professional’ that the ‘Appellant’ / ‘Applicant’ ‘claim of ownership’ is subject to the ‘Full Payment’ of the ‘entire consideration’ for the ‘Project’ and owing to the non-payment of the ‘contractual sum’, ‘one WEC’ was not handed over to the ‘Appellant’ / ‘Applicant’ and in the event of payment of ‘Full Dues’, the ‘1 WEC’ will be handed over to the Appellant, the present ‘Relief’ prayed for by the ‘Appellant’ / ‘Applicant’, seeking direction to the ‘Respondent’ / ‘Resolution Professional’ to deliver one 1500 KW WEC in ‘working condition’ etc., resting on the ground, that it belongs to it, is as ‘Ex Facie’, is not maintainable in the ‘eye of Law’, as opined by this ‘Tribunal’.
Conclusion :
Viewed in the aforesaid perspective and in the light of foregoing, IA/1147/IB/2020 in IBA/1099/2019 filed by the ‘Appellant’ / ‘Applicant’ is devoid of merits. Resultantly, the instant Comp. App. No.361/2022 preferred by the ‘Appellant’ / ‘Applicant’ is ‘Dismissed’. No Costs. The connected IA/827/2022 (for Exemption) and IA/828/2022 (for Direction) are Closed.