Mr. Vikram Bajaj vs Ram Chander Soni & Ors.

PER: BACHU VENKAT BALARAM DAS, MEMBER (JUDICIAL)

The present Application has been filed by Mr. Vikram Bajaj, the Resolution Professional of the Corporate Debtor, i.e., M/s. AMR Infrastructures Ltd. before this Adjudicating Authority Order under Section 66 read with Section 25(2)(J) of the Insolvency Bankruptcy Code, 2016 for seeking appropriate relief for avoidance of certain transactions of Corporate Debtor and consequential directions. The Applicant/Resolution Professional is seeking the following reliefs: -

Brief Background of the Case: -

The Corporate Debtor i.e., M/s. AMR Infrastructures Limited was incorporated on 15.06.2006. The main object as per the Memorandum and Articles of Associations is as under:

The promoters/shareholders of the Corporate Debtor are as under: S. Name Address No. of Face Value of No. Shares Value Shares

Arun 59/20, Second 15000 10 1,50,000 Kumar Floor, Prabhat Road, Soni WEA, Karol Bagh, New Delhi- 110005

Ram 59/20, First Floor, 15000 10 1,50,000 Chander Prabhat Road, WEA, Soni Karol Bagh, New Delhi-110005

Prashant 59/20, Third Floor, 15000 10 1,50,000 Soni Prabhat Road, WEA, Karol Bagh, New Delhi- 110005

Naveen 59/20, Basement 15000 10 1,50,000 Soni Floor, Prabhat Road, WEA, Karol Bagh, New Delhi- 110005

Ashish 292, Tagore Park 15000 10 1,50,000 Gupta (Extension), Model Town I, New Delhi-110009

Usha 292, Tagore Park 15000 10 1,50,000 Gupta (Extension), Model Town I, New Delhi-110009 15000 10 1,50,000

Ankit H-472, New Rajinder Gupta Nagar, Delhi-110060

Krishan 53/39, Ramjas Road, 15000 10 1,50,000 Kumar Karol Bagh, New Delhi -110005 TOTAL 1,20,000 10 12,00,000

The present and past directors of the Corporate Debtor are as under: DIN/PAN Name Begin date End date 00138579 KRISHAN KUMAR 04/10/2006 31/03/2016

06952797 MADHUR VERMA 05/10/2016 01/11/2017 07131830 RAJ KUMAR SONI 23/03/2015 --

This Adjudicating Authority vide order dated 10.05.2018 had admitted the C.P. No. (IB)-02(PB)/2017, filed by the Financial Creditor, Mr. Nikhil Mehta under Section 7 of IBC, 2016 and initiated the Corporate Insolvency Resolution Process (CIRP) against M/s. AMR Infrastructures Limited, the Corporate Debtor. Consequently, the moratorium was declared and Mr. Vikram Bajaj was appointed as the Interim Resolution Professional (“IRP”).

The IRP made a public announcement in Form-A dated 11.05.2018 on 15.05.2018 in Business Standard (English) and Business Standard (Hindi) in terms of Regulation 6(1) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The last date for submission of proof of claim was specified as 24.05.2018.

Pursuant to appointment of the Applicant as Resolution Professional, he has taken various steps for discharge of his duties in accordance with law including invitation and verification of claims, collation of information on assets of the company, custody of assets which are detailed in progress report filed by the Applicant which was taken on record in the hearing dated 05.07.2018.

In terms of the amendments w.e.f. 06.06.2018 read with regulations w.e.f. 03.07.2018 and circular issued by IBBI dated 13.07.2018, the Applicant filed C.A. No. 725(PB)/2018 seeking appointment of two authorized representatives in terms of Section 21(6) of the Code, wherein this Hon'ble Adjudicating Authority vide order dated 14.08.2018 allowed the application and has appointed Mr. Alok Kaushik to represent class of creditors for Real Estate Commercial and Ms. Maya Gupta to represent class of creditors Real Estate Residential.

The Applicant requested the promoters/directors to provide and give access to various information but they failed to provide and give access to information to the Applicant. The Applicant filed an application under Section 19(2) of the Code on 23.08.2018, seeking directions to the Suspended Board of Directors of the Corporate Debtor to cooperate and give access to all documents relating to the Corporate Debtor.

Thereafter, the first meeting of the Committee of Creditors was convened on 25.08.2018. However, due to low voting, none of the agenda as listed before the Committee or Creditors was approved. Therefore, the Applicant filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, being C.A. No. 811 (PB)/2018 before this Adjudicating Authority to issue necessary directions on Agenda placed before the Committee of Creditors in the first meeting dated 25.08.2018 which could not be decided in view of the low voting by financial creditors representing 52.78% vote share and to resolve the consequent deadlock and stalemate.

This Adjudicating Authority vide order dated 28.09.2018, held that in the case of Real Estate (Commercial & Residential) comprising 100% voting share in CoC, a resolution would be deemed to be passed if it is voted by highest number of Financial Creditor in the class of Real Estate (Commercial & Residential). It would make the code workable and would also advance the object of this progressive legislation rather than defeating it. Further, this Adjudicating Authority was pleased to appoint Mr. Vikram Bajaj as the Resolution Professional for the AMR Infrastructures Limited and also approved Agenda item no(s) 4, 6 to 9 as majority in meeting of the CoC dated 25.08.2018 had ratified those resolutions.

The 3rd meeting of the CoC was convened on 24.12.2018 wherein the Applicant apprised the members of the CoC about the appointment of Forensic Auditor of the Corporate Debtor. The members of the CoC noted the appointment of M/s. Khandelwal Jain & Co., Chartered Accountants as Forensic Auditor of the Corporate Debtor.

In view thereof, M/s Khandelwal Jain & Co., Chartered Accountants conducted the Forensic Audit of the Corporate Debtor for the period 15.06.2006 to 10.05.2018 as per the provisions of the Insolvency & Bankruptcy Code. 2016. M/s. Khandelwal Jain & Co., Chartered Accountants (hereinafter "Auditor") submitted a report dated 21.10.2019 wherein the Auditor observed that certain transactions are under purview of Section 43 and 66 of the Code, 2016.

Thereafter, the Applicant Resolution Professional took steps in accordance with the provisions of Section 25 of the Code to preserve and protect the assets of the Corporate Debtor and to run the business of the Corporate Debtor as a going concern. The Applicant also filed applications for avoidance transactions in accordance with Chapter III of the Code, under Sections 43, 45, 49, 50 and 66 of the Code which deal with preferential transactions, undervalued transactions, transactions defrauding creditors, extortionate credit transactions and fraudulent and wrongful trading. Hence, the present Application.

DETAILS OF THE FRAUDULENT TRANSACTIONS BY THE RESPONDENTS UNDER SECTION 66 OF THE CODE

AUDITOR’S OBSERVATION

It is submitted that the Auditor observed that the promoter/director of the Corporate Debtor has made various advances to parties for which no explanations have been given by the promoters/directors of the Corporate Debtors and also failed to provide any corroborating documents in order to evidence that the said payments have been made to the said parties in relation to the business of the Corporate Debtor. The Auditor has made the following observations in the Forensic Report, which are reproduced herein below for ready reference:

Under the given facts and circumstances, the possibility of diversion of funds and unjust enrichment to RCISL cannot be ruled out and this transaction was carried with intent to defraud creditors of Corporate Debtors under section 66 of the code. The Applicant has already filed an application before this Adjudicating Authority under Section 66 of the Code seeking avoidance of the said transaction which is pending adjudication.

The Respondent No.8 filed Reply Affidavit dated 07.12.2020, Respondent No. 1,2,6,7,10 and 11 filed Reply Affidavit dated 08.12.2020 and Respondent No.4 filed Reply Affidavit dated 10.12.2020 and submitted that the present Application is liable to be dismissed as the Applicant has failed to produce any substantial document to prove the false allegations against the Respondents.

It is submitted that all the relevant documents as required by the forensic auditor is lying at the Head Office of the corporate debtor which has been sealed by the Ld. Consumer Court Commission Bearing Execution Case No. 73 of 2016. The necessary steps could only be taken by the Resolution Professional and for the reasons best known, the Corporate Debtor's Corporate office is still under seal and no documents could be provided to the Forensic Auditor to properly conduct the auditing. Therefore, there could be no reliance on such half-baked report and Promoters/Directors ought not to be penalised for the lapses of the Resolution Professional. It is therefore, submitted that documents to substantiate the transactions mentioned in Para XIII and XIV are lying at the corporate office of the corporate debtor and the same is under seal as per the Orders of Ld. Consumer Court.

It is submitted that even the Forensic Auditor has sought for the said documents and the same were not provided by the Resolution Professional. The promoters/directors had offered to send over the auditor's team to assist the forensic auditor to conduct the auditing, however, devoid of any papers the same was impossible.

It is submitted that there has been a theft in the project Kessel-I Valley in Greater Noida, Plot No 9, Tech Zone, UP of the Corporate Debtor when the same was under the custody of the Resolution Professional. There has been a loss of approximately Rs. 4-5 crores (including various equipment’s/material, etc.) and Resolution Professional is yet to take steps to follow the recovery.

With respect to transactions mentioned in Para XV of the Application:

It is submitted that with respect to para XVI, the responses of the suspended board of directors have already been given to each and every transaction to the Forensic Auditor and the same is already recorded in the Annexures 4(a) and 4(b) to the report.

It is submitted that with respect to para XVII, C.A. No. 1214/2019 has been filed by the Resolution Professional before this Adjudicating Authority wherein the Applicant has failed to discharge the burden of proof to seek the reliefs as prayed in the present application.

It is submitted that with respect to para XVIII, C.A. No. 1114 of 2019 has been filed by the Resolution Professional before this Adjudicating Authority. It is submitted that the reply to the said application is already on record and the same be read as a part and parcel to the present reply. It is submitted that the Resolution Professional has failed to discharge the burden of proof to seek the reliefs as prayed in the present application.

It is submitted that with respect to para XIX, auditor has not reconciled the bank accounts showing the cash deposits. It is submitted that either payments of cash were done to the contractors/professional consultants for the interest of the home buyers/real estate project or advance has been paid for a particular job done. It is submitted that the payments made from the corporate debtor's account has been kept in the tally/journal which has been used by the auditor to prepare the report. It is submitted that the Respondents ought not to be held responsible for the acts and omissions of the Financial Creditors who without verification handed over monies to strangers who are not authorised by the Corporate Debtor.

It is submitted that the Corporate Debtorhas acted as per the contract with the home buyers and have committed to providing assured returns to almost all the investors for the years 2006-2017. It is submitted that the Corporate Debtor has also delivered a project in Kundli and second IT office to various investors of more than 7 lakhs sq. ft area in the project in Greater Noida named Kessel I Valley located at Plot No. 9, Tech Zone, Greater Noida UP.

The Respondents further ought not to be held responsible for any commercial business decisions taken for the benefit of corporate debtor or in good faith. The Respondents have failed to produce a single fact on record to show that any such action has led to the stopping of the Real Estate project.

It is submitted that the reason as to why the amount of sum as claimed by the financial creditors against the Corporate Debtor are not shown in the books of account is that no such transaction has been carried out by the corporate debtor and more so, no amount has been credited against the corporate Debtor. The allottees were aware that any consideration towards the sale of the units ought to only be given to Corporate Debtor by way of Cheque/DD/RTGS and the same has been specifically and categorically mentioned in the application form.

The Applicant in order to create false illusion of cause of action before this Adjudicating Authority has raised vague and unsubstantiated claims against the Respondents.

We have heard the Ld. Counsel appearing for the Applicant and the Respondents and also perused the documents on record.

It is the case of the Applicant/Resolution Professional that the Applicant being duly empowered under Section 20(2)(a) of the Code, 2016 appointed M/s. Khandelwal Jain & Co., Chartered Accountants as the Forensic Auditor of the Corporate Debtor for conducting the forensic audit of the Accounts of the Corporate Debtor and the same was apprised to the CoC members during its 3rd CoC meeting held on 24.12.2018. The Auditor shared the Forensic Auditor Report on 21.10.2019 for the period 15.06.2006 till 10.05.2018 wherein it was observed by the Auditor that certain transactions fall under the purview of Sections 43 and 66 of the Code, 2016.

The Ld. Counsel for the Applicant/Resolution Professional submitted that under Section 25(2)(j) of the Code, it is the duty of a resolution professional to file application for avoidance of transactions in accordance with Chapter III of the Code. Further Regulation 39(2) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016, obligates the Resolution Professional to report to the CoC, details of avoidance transactions as "observed, found or determined" by him. Therefore, the present application has been filed by the Applicant/Resolution Professional of the Corporate Debtor against the Respondents who are the Suspended Board of Directors /Shareholders /Promoters of the Corporate Debtor under Section 66 of the Code, 2016.

The Ld. Counsel for the Applicant/Resolution Professional submitted that the transactions entered by the promoters and directors of the Corporate Debtor have been carried out with the intent to defraud the financial creditors which eventually resulted in a shortage of the resources available to the Corporate Debtor and the construction of Kessel-I-Valley project of the Corporate Debtor in respect of which collections were received from investors was stalled and same is lying incomplete which has resulted in putting investment of thousands of investors in jeopardy. There were no board resolutions or minutes of meeting wherein the Board of Directors of the Corporate Debtor had resolved to authorise any broker/agents to collect cash from the allottees on behalf of the Corporate Debtor and to deposit such cash received in the bank accounts of the Corporate Debtor. The transactions were knowingly carried out by the promoters and directors of the Corporate Debtor with an intention to defraud the creditors and never pay back the debt due. The same has been held by the UK Court of Appeal in the case of Grantham vs R (1984) OB 675.

It is submitted that Section 66(1) of the Code specifically includes any person who were knowingly parties to the carrying on the business which is held to be either with (a) an intent to fraud the creditors or (b) for any fraudulent purpose then the Adjudicating Authority has power to direct any person to make such contributions to the assets of the corporate debtor as it may deem fit. It is worthwhile to A Ramaiya, Guide to Companies Act, where while dealing with Section 542 of the Companies Act, it is stated as follows: -

It is further submitted that any transaction which has an adverse bearing on the financial health of a distressed Corporate Person has to be viewed with considerable disfavour. It is worthwhile to refer to the decision of the Hon’ble Supreme Court in the matter of Anuj Jain Interim Resolution Professional for Jaypee Infratech Limited V. Axis Bank Limited passed in Civil Appeal No. 8512-8527 wherein the Hon’ble Supreme Court held as below:

It is submitted that establishment of fraudulent conduct does not require the same standard of proof as in criminal trial. Reliance has been placed upon the judgment of Hon’ble NCLAT in the case of Tridhaatu Kirti Developers LLP Vs. Mr. Arihant Nenawati, Liquidator of Royal Refinery Pvt. Ltd. (Company Appeal (AT)(Insolvency) No.95/2021 wherein it was observed that: -

On the contrary, the Ld. Counsel for the Respondent submitted that the present application is liable to be dismissed on the following grounds: -

The Ld. Counsel for the Respondents submitted that the Forensic Report is not conclusive evidence as the forensic audit report clearly states that the report does not constitute an audit of the financial statements provided by AMR. There was no physical verification of fixed assets namely plant /machinery/land/building and no written confirmation from the debtor /creditor was called. The draft report has been sent to Resolution Professional who will have the final say on the said report. The forensic audit report is not an independent report. The report states that random checks on the expenses were done and not on the complete transactions, therefore, such cherry picking of accounts is not conclusive to burden the Ex-Management with any such liability which is yet not proved. In clause IV, it is stated that the procedures/enquiries do not include verification. In Clause VIII, the report further states that no questionnaires were sent to sundry debtors/vendors/bankers and no confirmations were obtained. Therefore, hardly any effort was made by the auditor to give an unbiased opinion on the transactions.

We are of the considered view that after the examination of records and identification of fraudulent transactions assailed in C.A. No. 1114 of 2018 and C.A. No. 1214 of 2019, the Resolution Professional required a thorough examination of records of the Corporate Debtor which was carried with the assistance of the forensic auditor. The observations in the Audit report were backed by the accounts of the Corporate Debtor and other relevant records provided as annexure to the Audit Report. The Audit Report also notes the comments of the promoters/suspended directors of the Corporate Debtor alongside each observation. Besides the Forensic Auditor appointed by the Applicant, the Investigating Officer of Economic Offence Wing had also appointed M/s. V C Gautam & Co., Chartered Accountants (which is independent of the Applicant and much prior to initiation of CIRP). The report of M/s. V C Gautam & Co., Chartered Accountants also notes similar observations and the said report has also been taken into account by the Applicant/Resolution Professional in forming his opinion. The Applicant has also taken into account the observations in various charge sheets filed against the respondents in FIR No. 173/2015 which contain detailed account of investigation by the Investigating Officer and as well as the records of the Corporate Debtor. Thus, the opinion of the Applicant is not solely based on forensic audit report but is also based on other records which have been duly filed along with the Application.

This Adjudicating Authority vide Order dated 11.02.2025 passed in CA-1114/2018 held certain transactions to be fraudulent and made the following observations: -

Since, we have already taken a view in CA-1114 of 2018 and held that the transactions incurred by the Suspended Directors of the Corporate Debtor were to defraud the creditors of the Corporate Debtor and also held them to be fraudulent in terms of Section 66 of the Code. The contention of the Respondents that the Audit Report is not an independent report, having been prepared by the Auditors appointed by the Applicant himself cannot be sustained since the Audit Report of M/s. V C Gautam & Co., Chartered Accountants (which is independent of the Applicant) also notes similar observations and the said report has also been taken into account by the Applicant to form an opinion as to the nature of the transactions. Therefore, upon a perusal of the record, we are of the considered view that the transactions mentioned under Paragraph XIII to XIX are fraudulent under Section 66 of the Code.

The Respondents have made the said transactions knowingly and with an intent to defraud the allotees. Thus, the Respondents have entered into the aforesaid transactions after receiving funds from the allottees in the year 2006 and subsequently diverted the same to its related parties or parties who have no connection to the project or business of the Corporate Debtor in order to defraud its own creditors i.e. the investors (Real Estate Residential and Commercial) who have invested their hard earned money into the project and the Respondents have diverted the funds raised from the said investors i.e. financial creditors to its related entity and further entered into covenants for unjust enrichment of various related entities. The rights and interests of the bonafide homebuyers/allottees shall be protected in accordance with the law by the Resolution Professional /Successful Resolution Applicant.

It is therefore, directed that the Respondents, who are the Directors and Promoters of the Corporate Debtor shall make total contributions amounting to Rs. 77,14,27,005/- (Rupees Seventy Seven Crore Fourteen Lakhs Twenty Seven Thousand and Five Only) to the Corporate Debtor within two months from the date of this Order, failing which necessary legal actions may be taken. The Respondent No.5, namely Mr. Madhur Verma accepted the notice sent by the Applicant vide E-mail dated 04.12.2023 and have concurred with the prayer sought in the present application. We also direct the forensic audit of books of Accounts of MRG Promoters Pvt. Ltd., being the subsidiary of the Corporate Debtor.