Mr. Dinesh Kumar Garg vs M/s. Adwik Homes Private Limited

ORDER

2. Brief Background of proceedings:

“This application has been filed by Mr. Dinesh Kumar Garg, the Operational Creditor herein, under Section 9 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of CIRP against M/s. Adwik Homes Private Limited, the Corporate Debtor herein for an alleged default of Rs. 1.15 Crore out of which it is stated by the Ld. Counsel appearing on behalf of Applicant that Rs. 41 Lakhs is the principal amount and interest at the rate of 24% is chargeable. Issue notice to the Respondents. The Applicant is directed to serve notice along with a copy of the application on the Respondents by all modes and file proof and affidavit of service within one week. The Respondents are directed to file reply affidavit within one week thereafter.

The Applicant is directed to file an affidavit stating that the present petition is not a collusive one before the next date of hearing.”

“3.

I affirm that the present application has been filed in a bona fide manner, without any collusion or connivance between the parties involved. This application is initiated solely to recover the legitimate dues owed to the Operational Creditor by the Corporate Debtor.

4.

I declare that the facts stated in the petition are true and correct to the best of my knowledge and belief. I have thoroughly reviewed the contents of the petition and confirm that all statements made therein are accurate and based on verifiable information.”

3. Submissions of the Operational Creditor

4. Submissions of the Corporate Debtor

"17.

All disputes and differences arising out, if or in any way touching upon or concerning the agreement whatsoever shall be referred to the Arbitration or any person appointed with the consent of both the parties. The award of such arbitrator shall be final and binding on the parties to this agreement. It is a term of this agreement that in the event of such arbitrator to whom the matter is originally referred/ being transferred or vacating his office or being unable to act for any reason then both the parties amicably at that time shall appoint any other person to act as a Arbitrator in accordance with the terms of this Agreement."

5. Rejoinder submissions of the Operational Creditor

6. ANALYSIS AND FINDINGS :

Dear Sir, As you have requested to know your due salary till August’2019, the detail is given in the attachment. Please acknowledge and let me know if you have any query. Thanks & Regards V. R. Jha 8130288500

Dear Mr. Dinesh Kumar Garg, As discussed in the common meeting at our office on 3^rd September, 2019 with all Employees and Directors of M/s Adwik Homes Pvt. Ltd, and, you have requested to know the dues and unpaid amount towards your salary a/c till August-2019 as per accounts department is given below: Current Amount Rs.41,25,000/-In Words (Rupees Forty One Lakhs Twenty Five Thousand only) Please acknowledge if there is any difference in the amount written above.”

“We hereby issue this present Settlement cum investment certificate of the dues on the 1st day of November 2019 in the form of investment concerning the total outstanding salary dues to be paid by the company in favor of Mr. Dinesh Kumar Garg, s/o Mr. Ravindra Kumar Garg, residing at Block-D, House no 46, Gali no 5, Khajuri Khas, Delhi 110094, who is the erstwhile director and served as the director of our company from December 2013 and tendered his resignation on 20th January 2019. In view of the same, his total outstanding salary pending to be paid is Rs. 40,25,000/- (Rupees Forty Lakhs Twenty-Five Thousand only). Also, an outstanding payment of Rs. 13,60,000/- (Rupees Thirteen Lakhs Sixty Thousand only) remains due. This amount was provided by Mr. Dinesh Kumar Garg to the company through both cash and account transfers. In this regard, the company is facing some financial difficulty and, therefore, issuing this present certificate with the consent of Mr. Dinesh Kumar Garg, the erstwhile director, to consider the aforesaid amount in the form of an Investment/loan to the company and terms of the present settlement are given in details as follows:

I. TERMS AND CONDITIONS:

1.

Lock-in Period: The investment made by both parties shall be subject to a locking period of 4 years 5 months from the date of execution of this Certificate, i.e., until 31.03.2024. During this period, Mr. Dinesh Kumar Garg cannot individually terminate this certificate or seek a refund of the invested amount.

2.

Interest Payment: The Company agrees to pay an interest of 24% per annum on the total invested amount. The interest shall accrue from the date of investment until the expiry of the locking period.

3.

Redemption: The invested amount along with accrued interest can only be redeemed by the Investor after the expiry of the locking period, ie., after 31.03.2024. The interest shall continue to accrue on the outstanding amount until such time as the full amount is settled by the Company.”

“a. There cannot be a debt within the meaning of subsection (11) of section 5 of the IB Code unless there is a claim within the meaning of sub-section (6) of section 5 of thereof;

b. The test to determine whether a debt is a financial debt within the meaning of sub-section (8) of section 5 is the existence of a debt along with interest, if any, which is disbursed against the consideration for the time value of money. The cases covered by categories (a) to (i) of sub-section (8) must satisfy the said test laid down by the earlier part of sub-section (8) of section 5;

c. While deciding the issue of whether a debt is a financial debt or an operational debt arising out of a transaction covered by an agreement or arrangement in writing, it is necessary to ascertain what is the real nature of the transaction reflected in the writing; and

d. Where one party owes a debt to another and when the creditor is claiming under a written agreement/ arrangement providing for rendering 'service', the debt is an operational debt only if the claim subject matter of the debt has some connection or co-relation with the ‘service’ subject matter of the transaction.

“However in this instant matter the Petitioner, who is also one of the director of the Corporate Debtor, invested money in the Corporate Debtor for production of a movie. In light of the above facts and circumstances we are of the view that an Investment made by the director of the Company does not fall under the purview of an Operational Debt under the Code. Hence, C.P. (IB) No. 178/KB/2021 the stands dismissed.”

I.A. -2161/2025

“It is, therefore, most respectfully prayed that the present application as filed by the applicant may kindly be allowed and the petition filed under Section 9 of the Code,2016, by the Respondent No.1/Operational Creditor may kindly be dismissed, with exemplary costs and also penalty as provided under Section 65 of the Code,2016, may kindly be imposed upon the Respondent No.1/ Operational Creditor for filing petition with malicious, dishonest and fraudulent intentions, coupled with forged and fabricated documents. It is further most respectfully prayed that the proceedings of the petition filed under Section 9 of the Code,2016, by the Respondent No.1/Operational Creditor may kindly be stayed till the adjudication & disposal of the application as filed by the applicant under Section 65 of the Code,2016, for the ends of justice.”

A. BECAUSE the present petition has been filed by the Respondent No.1/Operational Creditor under Section 9 of the Insolvency and Bankruptcy Code, 2016 and the said provision of Section 9 of the Code, specifically says that an application can be initiated of corporate insolvency resolution process by Operational Creditor in respect of "operational debt". It is submitted that the "operational creditor" is defined under the IBC,2016, which says "operational creditor' means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred" The Code,20 16, also defines the "operational debt", which says "operational debt' means a claim in respect of the provisions of goods or services including employment or a debt in respect of the (payment) of dues arising under any law for the time being in force and payable to the Central Gout., any State Gout. Or any local authority".

B. BECAUSE as per above submission, the claim as made out by the Respondent No.1/Operational Creditor for the alleged amount of Rs.1,15,92,999/- as Operational Debt is totally unwarranted, unjustified and in contrast to the provisions & definitions, as submitted hereinbefore. In this respect it is submitted that it is the own case and claim of the Respondent No.1/0perational Creditor, that there are outstanding salary of Rs.40,25,000/- and alleged outstanding loan amount of Rs.13,60,000/-. It is further the case of the Respondent No.1f0perational Creditor that he allegedly made the investment of the said outstanding salary and outstanding loan amount and in support thereof, the Respondent No.1/Operational Creditor has filed a fabricated and forged document i.e. Settlement cum Investment Certificate dated 1st November,2019. On such assertion and contentions of the Respondent No.1/Operational Creditor of making alleged investment, the present application/petition as filed under Section 9 of the IBC, 2016 is legally not maintainable, as the same pertains to the "Operational Debt", and since the Respondent No.1 /Operational Creditor has allegedly made investment of the alleged amount, then it does not falls under the definition of "Operational Debt" as per provisions of IBC,2016. The Respondent No.1/ Operational Creditor has wrongly and falsely invoked the provisions of Section 9 of the IBC,2016, while setting up his case of 'operational debt' when the case of the Respondent No.1/Operational Creditor comes under the category of 'Operational Debt' and as such the present petition deserves to be dismissed outrightly.

C. BECAUSE the Respondent No.1/Operational Creditor cannot take advantage of his wrongs and misdeeds, based on the forged and fabricated document i.e. alleged Settlement cum Investment Certificate dated 01.11.2019. It is apparently clear that the said alleged Certificate is having 03 pages, while page 1 & 2 are not signed by the Corporate Debtor and so far, the signatures at Page 3 signed by the Director of Corporate Debtor company are not binding upon the Company i.e. Corporate Debtoras no Resolution was ever passed by the Board of Directors of the company, authorising and empowering Mr.Sharad Singhal, who happens to be a close relative of the Respondent No.1/Operational Creditor. Thus the petition as filed by the Respondent No.1/Operational Creditor deserves dismissal. Section 65 of the IBC,2016, says that-

“65. Fraudulent or malicious initiation of proceedings-

(1)

If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the adjudicating authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extent to one crore rupees.

(2)

If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the adjudicating authority may impose upon such person a penalty which shall not be less than one lakh rupees but may extent to one crore rupees.

(3)

If any person initiates the pre-packaged insolvency resolution process-

(a)

fraudulently or with malicious intent for any purpose other than for the resolution of insolvency; or

(b)

with the intent to defraud any person the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees."

D. BECAUSE the Respondent No.1/Operational Creditor has not come before this Hon'ble Tribunal with clean hands and has not stated the true and correct facts, rather suppressed the true facts from this Hon'ble Tribunal, only due to malicious intentions to cause irreparable losses and damages to the company i.e. Corporate Debtor, who are carrying the business of construction of various residential projects and the Respondent No.1/Operational Creditor is hellbent to derail the said projects of the company and in this way the company will never overcome and will be ruined. Since the applicant is having substantive stake being the shareholder, therefore, the applicant has valuable rights and interests in the company as well as to safeguard the said rights and interests.

E. BECAUSE the present petition is gross abuse and misuse of process of law and has been filed with dishonest, fraudulent and malicious intentions, which are apparent from the fact that the petition is based upon a forged and fabricated document i.e. Settlement cum Investment Certificate dated 01.11.20 19.

F. BECAUSE one hand the Respondent No.1/Operational Creditor has made story of investment of amounts of outstanding salary of Rs.40,25,000/- and outstanding loan of Rs.l3,60,000/-, in the company i.e. Respondent No.2/CD and on the other hand, in the said alleged Settlement cum Investment Certificate dated 01.11.2019, the Respondent No.1/Operational Creditor has alleged compoundable interest@ 24% p.a. As settled law, in case of investment, the claim as return on such investment falls in the definition of "Profit" and admittedly, such claim of Profit does not comes under the "Operational Debt". Admittedly, the Respondent No.1 /Operational Creditor has maliciously and wrongly made claim of operational debt and filed petition under Section 9 of IBC,2016, when as per his own case, there is no 'operational debt', hence the petition in hand is legally not maintainable and liable to be outrightly dismissed.

G. BECAUSE no cause of action has arisen in favour of the Respondent No.1/ Operational Creditor to institute the present petition and even the claims as made out by the Respondent No.1/Operational Creditor does not fall in the ambit of Insolvency & Bankruptcy Code, 2016.

“10.

In terms of Section 65 of the Insolvency and Bankruptcy Code, 2016, there must be substantial and corroborative evidence to explicitly prove ‘fraudulent intent’, ‘malice’ and ‘mens rea’ on part of the CD by way of specific documentary evidence and also that the Applicant approached with malicious intent for any purpose other than for the resolution of insolvency.”

“32.

While returning our findings on the tenability of the impugned order, we must at the very outset add that that to prove any transaction to be collusive and fraudulent in nature, the degree of proof and evidence required should be beyond reasonable doubt and we propose to apply the same standard of proof to the facts of the present case.”

I.A. -1846/2025

“It is, therefore, most respectfully prayed that the Hon'ble Tribunal may be graciously pleased enough to reject an application bearing IB No. 43/ND/2025 filed by the respondent under section 9 of the IB Code, 2016 for initiation of the Corporate Insolvency Resolution Process against the Applicant-Corporate Debtor, as having no power and jurisdiction because of the suppression and concealment of material facts and forged and fabricated documents by the respondent before the Hon'ble Tribunal and the respondent was not empowered and entitled for institution of the application/Petition bearing lB. No. 43/ND/2025 for initiation of Corporate Insolvency Resolution Process against the Applicant-Corporate Debtor. Any other relief which this Hon'ble Tribunal may deems fit and proper be also granted in favour of the applicant-corporate debtor.”