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Judgment
ORDER
Brief Facts:
This Company Petition is filed under section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) by Mrs. Vijaylaxmi Ghuwalewala ("hereinafter referred to as the Financial Creditor/Applicant"), seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Mobile Constructions Pvt. Ltd. ("hereinafter referred to as the Corporate Debtor/Respondent/MCPL").
The Applicant is an Indian citizen having her office address at Shop No.1, Mahatarangan CHS Ltd., Sector No.5, BMC Colony, Opp. Mega Mall, Anand Nagar, Oshiwara, Jogeshwari (West), Mumbai – 400 102.
The Respondent is incorporated under the Companies Act, 1956 on 12.04.1993 having Company Identification no. U45200MH1993PTC071550 with its registered office at 6th Floor, A Wing, Universal Business Park, Chandivali, Andheri (East), Mumbai - 400072. Its authorized share capital is Rs. 1,00,000/- and Paid up share Capital is Rs. 1,00,000/-. It is involved in the business of construction/real-estate and civil engineering.
The total amount of default as stated in Part IV of the Application is Rs. 7,20,23,656/- (Rupees Seven Crores Twenty Lakhs Twenty Three Thousand Six Hundred and Fifty-Six Only) and the date of default is 02.11.2023. The Applicant has also placed on record the NeSL certificate substantiating the same.
Submissions of the Applicant:
A Memorandum of Understanding (MOU) was executed on December 10, 2018, (hereinafter referred to as the “said MOU”) between the Applicant, a partner in M/s. Vetiro Properties LLP, and the representative of the Corporate Debtor, Mr. Rajesh Madhani. The MOU outlined the terms for advancing funds to a sister concern of the Corporate Debtor, Mighty Constructions Pvt Ltd, for construction projects in and around Mumbai.
Mr. Rajesh Madhani requested the Applicant to transfer Rs. 4,08,50,000 (Rupees Four Crores Eight Lakhs Fifty Thousand Only) into the account of the Corporate Debtor, asserting his ownership, control, and managerial role. Relying on these representations, the Applicant, through her partnership firm, transferred the amount in 13 installments into the Corporate Debtor's account.
The Applicant transferred a sum of Rs. 4,08,50,000 into the Corporate Debtor's account. The Director of the Corporate Debtor acknowledged the receipt of the aforementioned debt through a letter dated May 29, 2019.
In August 2023, the Applicant discovered that the transferred amount was duly reflected as an unsecured loan in the Corporate Debtor's Audited-Balance Sheets of the FY 2020-2021 and FY 2021-2022. The Corporate Debtor acknowledged and admitted the loan and advances granted by the Applicant in its audited balance sheets.
The Corporate Debtor was required to pay interest at the rate of 16.65% on the sum of Rs. 4,08,50,000, as per the MOU. The Applicant, having not received the agreed payments, issued a legal Notice dated October 20, 2023, recalling the unsecured loan with interest.
The legal notice dated October 20, 2023, was sent to the Corporate Debtor via registered post on October 23, 2023. However, the registered post was returned as "Unclaimed" on November 3, 2023, after unsuccessful attempts to deliver it on October 25, 2023, and October 26, 2023. Despite a specific demand for repayment within 7 days, the Corporate Debtor failed to make the required payments. The date of default occurred on November 2, 2023, being the expiry of the 7-day period from the date of the demand notice on October 25, 2023.
The default amount is reflected as payable in audited financial balance sheets for the FY 2019-2020 and FY 2020-2021. Hence the present application.
Submissions of the Respondent:
The Respondent has contested the present petition on the following grounds:
Out of Rs.12,00,00,000/- (Rupees Twelve Crores) to be advanced to M/s Mighty Constructions Pvt. Ltd. only a sum of Rs. 4,08,50,000/-(Four Crore Eight Lakhs Fifty Thousand Rupees) has been advanced till date to the M/s Mighty Constructions through the corporate debtor. The corporate debtor states that the monies advanced is not an isolated transaction and are a part of a larger transaction as per the said MoU. The Corporate Debtor states that, the said Loan is a part of an entire transaction arrangement between One M/s. Mighty Constructions Private Limited. (Sister Concern of the corporate Debtor) one Mr. Rajesh Madhani and one M/s. Vetiro Properties LLP.
The said MoU has already been terminated by M/s Mighty Construction Pvt. Ltd and the applicant has accepted such termination and as such no claim can be made by the applicant under the said MoU. In this regard, the following is relevant: -
a. One M/s. Mighty Constructions Private Limited (Sister Concern of the corporate Debtor) one Mr. Rajesh Madhani and one M/s. Vetiro Properties LLP entered into said MoU on 10.12.2018 as per the said MoU.
M/s. Mighty Constructions Private Limited could sell its four commercial Premises at Andheri at a discounted rate of 13,81,79,200/- (Thirteen Crores Eighty-one Lakhs Seventy Nice Thousand Two Hundred Only) i.e., almost at Fifty Percent discounted rate than the actual market price of 28,00,00,000/-(Twenty-Eight Crores Only) [i.e., adjustment of the Loan of Rs.14 Crores against part aggregate market sale price]. As per the said MoU the Applicant was to further invest Rs. 12,00,00,000/- (Twelve Crores Only) into the M/s. Mighty Constructions. As per the said MoU M/s. Montana developers Private Limited was permitted to occupy the said premises on leave and license basis as per the terms recorded in agreement dated 19.12.2018.
As per the MoU, M/s. Mighty Constructions was liable to allot such area to M/s. Vetiro Properties LLP against the total borrowed amount plus outstanding interest.
As per the MoU, at the time of Buyback of said four office unit, M/s. Mighty Constructions was also liable to refund 50% of processing and borrowing charges of Rs. 83,32,720/- (Eighty- Three Lakhs Thirty-Two Thousand Seven Twenty Only) & 87,00,000/- (Eighty-Seven Lakhs) stamp duty and Registration Charges for the Sale Agreement of the said premises.
A discount of Rs.14 Crores in Market Price was given by Mighty to Vetiro on the assured new Investment of Rs.12 Crores by Vetiro in Mighty and also in view of purported Assignment of Mighty's Loan of Rs. 14 Crores by Investor Group to VETIRO Properties LLP.
Applicant's firm failed to make investments to purchase Rs. 14.00 cr loan papers.
As per the MOU obligation's, Corporate debtor had executed sale agreement of the said 4 units to the applicant's firm as security with Buyback terms, condition and toward their commitment to infuse investment.
Out of the 13,81,79,200/- (Thirteen Crores Eighty-one Lakhs Seventy Nice Thousand Two Hundred Only) the Applicant made a delayed payment of Rs. 5,90,00,000/- (Five Crores Ninety Lakhs Only) after four months of Execution of sale agreements.
As per the said MoU, M/s. Vetiro Properties LLP was to invest a sum of Rs. 12,00,00,000/- in M/s. Mighty Constructions, however till today only Rs. 5,33,50,000/- was paid by M/s. Vetiro Properties LLP to M/s. Mighty. M/s Mighty Construction has addressed a legal Notice dated 20.07.2020, 07.03.2022 to M/s. Vetiro Properties LLP regarding the balance payment to which M/s. Vetiro Properties LLP has not responded to till date.
The Applicant through M/s. Vetiro has failed in its obligation to pay the balance investment to M/s. Mighty Constructions. Mr. Manmohan Ghulewala requested Mr. Rajesh Madhani to transfer a sum of Rs. 3,67,50,000/- in the following manner.
I. Between 5.04.2019 and 08.04.2019 a sum of Rs. 50,00,000/-(Rupees Fifty Lakhs Only) was transferred into account of M/s. LNT Trading from the account of Mr. Rajesh Madhani.
II. Rs. 1,60,00,000/- (Rupees One Crore Sixty Lakhs Only) was paid from the account of corporate debtor, between 25.04.2019 and 02.05.2019 to BJIRD Exim Private Limited.
III. Rs. 1,57,50,000/- (One Crore Fifty-Seven Lakhs Fifty Thousand Only) was paid to Apple Land Development Pvt. Ltd. between 10.04.2019 till 24.04.2019. The three entities referred to above are under the supervision and or control of Mr. Manmohan who is the husband of the present applicant. Also, Mr. Manmohan Ghuwalewala is a signatory to the said MoU and therefore, out of the purported investment amount of Rs. 4,08,50,000/- (Four Crore Eight Lakhs Fifty Thousand Rupees) the Corporate Debtor has forwarded Rs. 3,67,50,000/- to the entities under the direct control of partners of M/s. Vetiro Properties LLP in form of a loan. The amount of Rs. 3,67,50,000/- was never returned back to the corporate debtor.
Further, under the leave and license agreement pursuant to the said MoU the Corporate Debtor through its sister concern M/s Montana Developers has paid Rs. 33,00,000/- (Thirty-Three Lakhs Only) to Vetiro Properties LLP in the form of Security Deposits. The understanding was always that the said security deposit is a repayment of the monies advanced by Applicant to the corporate debtor. Out of the monies advance of 4,08,50,000/- (Four Crores Eight Lacs and Fifty Thousand Only) by the applicant to corporate debtor, the applicant has forwarded Rs. 3,67,50,000/- (Rupees Three Crores Sixty-Seven Lacs and Fifty-Thousand Only) to the entities in supervision and control of Mr. Manmohan Ghulewala at the request of Mr. Manmohan, the husband and partner of the applicant in Vetiro properties LLP.
The corporate debtor through their advocates letter dated 07.03.2022 have terminated the MoU. The said termination is valid and subsisting and till date not in challenge by the said Vetiro properties.
Clause 6 of the said MoU provides arbitration clause and accordingly an arbitration petition no. 14298 of 2023 is pending before the Hon'ble Bombay High Court.
The Corporate debtor has also filed WRIT no. WP 6974/2023 against Divisional joint registrar Co-operative societies, Mumbai which is due for hearing. Applicants firm has without making party to corporate debtor, falsely got favorable order from Joint registrar for transfer of corporate debtor office premises in their company's name which corporate debtor, had challenged by filing WRIT petition against Joint registrar to retain four unit office ownership to the corporate debtor.
Further, the said MoU does not contain any date with respect to repayment of the money advanced to the corporate debtor. The alleged debt is also not 'payable' as the said MoU has not contemplated any date of maturity of loan/investment and therefore, no date can be assigned as per the said MoU when the alleged debt is said to be pending.
Further, the Corporate Debtor has initiated proceedings under Section 7 of IBC bearing Company Petition no. (IB)1052(MB)/C-III/2023 against one entity under the control and supervision of Mr. Manmohan Ghulewala and the applicant i.e., M/s Bjird Exim Private Limited & the Petition has been admitted and corporate insolvency resolution process has been initiated by order dated 01.10.2024.
The Corporate Debtor has also filed proceedings under Section 7 of IBC bearing Company Petition no. (IB)1051(MB)/C-II/2023 against M/s Apple Land Development Private Limited. The said Petition was dismissed by an order dated 21.02.2024 for want of limitation. The Corporate Debtor has filed a Company Appeal Before the NCLAT bearing Company Appeal (AT)(INSOLVENCY) No. 756 of 2024. The said Appeal is pending Adjudication.
The Corporate Debtor is under process of instituting recovery proceedings against M/s LNT trading which is a firm under the control and supervision of the applicant and her husband Manmohan Ghuwalewala.
A FIR Bearing No.965 of 2020 dated 16.08.2020 was lodged by Sakinaka police against unknown persons by Mr. Swapan Roy who was at that relevant time watchman of the premises where the Corporate Debtor’s office is located.
Submissions of the Respondent vide additional affidavit:
Vide its additional affidavit the Applicant has further submitted as under:
The Petition is filed by the wrong party – the alleged loan amount claimed is under agreement dated 10.12.2018 wherein the Applicant is not a party. Also, even the Respondent is not a party to the said agreement.
The Applicant does not treat the alleged “debt” amount as an independent transaction but as a part and parcel of the Agreement.
There exists no default.
The alleged loan was an “investment” and not an unsecured loan.
The Respondent had disbursed Rs. 3,67,50,000/- (Rupees Three Crore Sixty-Seven Lakh Fifty Thousand only) out of the investment amount of Rs. 4,08,50,000/- (Rupees Four Crore Eight Lakh Fifty Thousand only) on the assurance that this amount will be returned back to the Respondent. This amount as on date, is not returned.
Out of a total assured investment of Rs. 12,00,00,000/- (Rupees Twelve Crore only), Vetiro, in which the Applicant is a partner, has invested only a part amount of Rs. 5,33,50,000/- (Rupees Five Crore Thirty-Three Lakh Fifty Thousand only). Since the Applicant failed to invest the balance amount, the Respondent terminated the Agreement vide letter dated 07.03.2022, which was not disputed by the Applicant. Hence, it has been 2 years since the termination of the agreement.
The License fee/rent was to be adjusted against the balance investment thereby. The leave and license mentioned in the agreement was a financial transaction as “return of investment” to offer comfort to Vetiro for the purpose of adjusting its investment in Mighty in the event of failure Vetiro committing any default in the Investment.
The termination notices given by Vetiro are based on false facts.
Mighty has filed an Arbitration Application bearing number Commercial Arbitration Application (L) No. 14298 of 2023 seeking appointment of Arbitrator to adjudicate on the disputes arisen under the agreement.
The Respondent has further submitted that since this Tribunal has summary jurisdiction, it does not have power to decide questions of fraud which require evidence to be led. The respondent has relied upon the judgment passed by the Supreme Court in State of A.P. vs. T. Suryachandra Rao (2005) 6 SCC 149 and the judgment of NCLAT in Satori Global Limited vs. Shailaja Krishna, Company Appeal (AT) Nos. 379 of 2018 decided on 02.06.2023, for substantiating the same.
The Date of default mentioned in Part – IV of the Application is 02.11.2023 and the interest is calculated from the period between 01.05.2019 to 01.12.2023 is incorrect. If the interest is calculated from May, 2019 then the default has to necessarily pre-date the interest period. Hence, the debt amount and the date of default is incorrect. The first date of disbursal was 15.02.2019, from which the interest should have been calculated.
Findings:
Heard learned counsel for both the parties and perused the material produced on record.
The contention of the Applicant that Mr. Rajesh Madhani is not authorized to verify, sign and execute documents on behalf of the Respondent is untenable as the Respondent has placed on record the Board Resolution dated 10.06.2024 authorizing the same vide its additional affidavit dated 17.12.2024.
Undisputedly, there was a memorandum of understanding dated 10.12.2018 between the Petitioner’s partnership firm and the Sister concern of corporate debtor and one of its director; the payment, in question, was made from account of such partnership firm on behalf of the petitioner; the said payment is acknowledged as payable to the Petitioner in the financial statement of the Corporate Debtor; and the Corporate Debtor’s financial statements also reflect advances made to M/s Apple Land Development Private Limited and Bjird Exim Private Limited, against whom the Corporate Debtor initiated action in terms of Section 7 of IB Code treating such advances to each of company as an independent transaction.
On perusal of the terms of Memorandum of Understanding, we note that the said MOU pertains to a transaction of borrowing, however, neither the Corporate Debtor nor the Petitioner, in her individual capacity, is a party to said MOU, though the Petitioner has also relied upon such MOU in this Petition. We note that the Corporate Debtor was paid a sum of Rs. 4,08,50,000/- from the period 15.2.2019 to 25.04.2019 and the Corporate Debtor is stated to have advanced money amounting to Rs. 3,67,50,000/-to the group companies of the Petitioner (including LNT Trading) during 05.4.2019 to 2.5.2019. The Corporate Debtor has stated that a sum of Rs. 4,08,50,000/- was paid to it a part of larger transaction of investment contemplated in the MOU, and out of Rs. 4,08,50,000/-, it has already refunded back Rs. 3,67,50,000/- to group companies and further paid Rs. 33,00,000/- as security deposits to Veitro, the partnership firm of the Petitioner. However, the said explanation of the Corporate Debtor is contrary to its stand taken in CP No.(IBC)1051/MB/2023 and CP(IB)1052(MB)/C-III/2023 filed against M/s Apple Land Development Private Limited and Bjird Exim Private Limited wherein the Corporate Debtor claimed advances made to these parties as an independent transaction of loan and pursued its case.
Having perused the Agreement dated 10.12.2018, we are of considered view that the transactions under said agreement is independent of transaction, which is subject matter of this petition. Further, we do not find any substance in the contention of the Corporate Debtor that the transaction in this Petition is subject matter of Arbitration Proceedings initiated by it, as said transaction is not referred in the petition filed before Hon’ble High Court for appointment of Arbitrator.
There is an acknowledgement of debt advanced to the Corporate Debtor in its financial statement and further vide letter dated 29.5.2019 signed by its director. Hence, the Applicant undisputedly has the locus to file the present Petition.
The money advanced without any stipulation as to date of repayment is payable on demand, and it cannot be said that such money is not refundable at all. Further, the Hon’ble Supreme Court in case of Orator Marketing Pvt Ltd. v. M/s Samtex Desinz Pvt. Ltd. held that interest free loan would be considered as financial debt under Section 5 (8) of the Insolvency and Bankruptcy Code, 2016.
In view of the above, we are of considered view that there exists a financial debt, exceeding the threshold limit prescribed u/s 4 of IB Code and the same is in default. The Petition is complete in all respects. Therefore, the Petition bearing CP (IB) 306/MB/2024 filed by Mrs. Vijaylaxmi Ghuwalewala, the Financial Creditor, under section 7 of the IBC read with rule 6(1) of the Insolvency & Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against Mobile Constructions Private Limited [CIN-U45200MH1993PTC071550], the Corporate Debtor, is admitted/allowed.
The Financial Creditor has proposed the name of Mr. Abhijit Shrikrishna Gokhale, Registration No. IBBI/IPA-002/IP-N00964/2020-2021/13092, as the Interim Resolution Professional of the Corporate Debtor. He has filed his written communication in Form 2 as required under rule 9(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
It is, accordingly, hereby ordered as follows: -
I. The Petition bearing CP(IB)/306(MB)/2024 filed by Mrs. Vijaylaxmi Ghuwalewala, the Financial Creditor, under section 7 of the IBC read with rule 4(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against Mobile Constructions Private Limited [CIN-U45200MH1993PTC071550], the Corporate Debtor, is admitted.
II. There shall be a moratorium under section 14 of the IBC, in regard to the following:
The institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;
Transferring, encumbering, alienating or disposing of by the Corporate Debtor any of its assets or any legal right or beneficial interest therein;
Any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act, 2002;
The recovery of any property by an owner or lessor where such property is occupied by or in possession of the Corporate Debtor.
Notwithstanding the above, during the period of moratorium: -
The supply of essential goods or services to the corporate debtor, if continuing, shall not be terminated or suspended or interrupted during the moratorium period;
That the provisions of sub-section (1) of section 14 of the IBC shall not apply to such transactions as may be notified by the Central Government in consultation with any sectoral regulator;
III. The moratorium shall have effect from the date of this order till the completion of the CIRP or until this Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 of the IBC or passes an order for liquidation of Corporate Debtor under section 33 of the IBC, as the case may be.
IV. Public announcement of the CIRP shall be made immediately as specified under section 13 of the IBC read with regulation 6 of the Insolvency & Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.
V. Mr. Abhijit Shrikrishna Gokhale, Registration No. IBBI/IPA-002/IP-N00964/2020-2021/13092, having registered address at A/1903, 19th Floor, Aryavarta, N L Complex, Dahisar (E), Opp. Anand Nagar, Mumbai-400068, Email ID: abhijitgokhale07@gmail.com mob.: 9619067834, is hereby appointed as Interim Resolution Professional (IRP) of the Corporate Debtor to carry out the functions as per the IBC. The fee payable to IRP or, as the case may be, the RP shall be compliant with such Regulations, Circulars and Directions issued/as may be issued by the Insolvency & Bankruptcy Board of India (IBBI). The IRP shall carry out his functions as contemplated by sections 15, 17, 18, 19, 20 and 21 of the IBC.
VI. During the CIRP Period, the management of the Corporate Debtor shall vest in the IRP or, as the case may be, the RP in terms of section 17 of the IBC. The officers and managers of the Corporate Debtor shall provide all documents in their possession and furnish every information in their knowledge to the IRP within a period of one week from the date of receipt of this Order, in default of which coercive steps will follow.
VII. The Financial Creditor shall deposit a sum of Rs.3,00,000/- (Rupees Three Lakhs only) with the IRP to meet the expenses arising out of issuing public notice and inviting claims. These expenses are subject to approval by the Committee of Creditors (CoC).
VIII. The Registry is directed to communicate this Order to the Financial Creditor, the Corporate Debtor and the IRP by Speed Post and email immediately, and in any case, not later than two days from the date of this Order.
IX. IRP is directed to send a copy of this Order to the Registrar of Companies, Maharashtra, Mumbai, for updating the Master Data of the Corporate Debtor. The said Registrar of Companies shall send a compliance report in this regard to the Registry of this Court within seven days from the date of receipt of a copy of this order.
Ordered accordingly.