Pramila Bajoria & Ors. vs Eastern Housing Udyog Finance Limited & Ors.

Ashok Bhushan, J.

This Appeal by the Appellants, who were erstwhile shareholders of the Corporate Debtor (“CD”) has been filed challenging the order dated 07.01.2026 passed by National Company Law Tribunal, Division Bench, Court No.I, Kolkata in I.A (IB) No.1583/KB/2024. I.A (IB) No. 1583/KB/2024 was filed by the Appellant under Section 65 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “IBC”) for dismissing the Company Petition filed and further praying to recall the admission order dated 15.12.2023 passed by Adjudicating Authority admitting Section 7 application filed by the Financial Creditor. Certain other prayers have also been made in the application, which have been noted by the Adjudicating Authority in the impugned order. The Adjudicating Authority by the impugned order rejected the application. Aggrieved by which order, this Appeal has been filed.

We need to notice relevant facts of the case for appreciating the issues sought to be raised by the Appellant in this Appeal:

We have heard Shri Rishav Banerjee, learned Counsel appearing for the Appellants; Shri Krishnendu Datta, learned Senior Counsel appearing for the FC; and Shri Abhijeet Sinha learned Senior Counsel appearing for Respondent No.7.

Learned Counsel appearing for the Appellants submits that Section 7 petition was initiated by the FC fraudulently and maliciously in connivance with the CD. It is contended that loan recall noticed dated 10.09.2020 was issued by the FC, which was signed by one Atish Kumar Shaw, authorized signatory of FC, who has also affirmed the affidavit in reply filed by the CD to the application filed under Section 7. It is submitted that the FC and the CD, both were acting through same individuals, which clearly indicate collusion between the parties. A General Power of Attorney was given to Mr. Atish Kumar Shaw on 05.10.2021 on behalf of the CD to appear in proceedings before the NCLT, who had also issued the legal notice dated 10.09.2020 on behalf of the FC. It is submitted that the FC is promoted and controlled by Respondent No.4 – Om Prakash Saxena, who was business partner with Appellant No.2. A Settlement Agreement was entered on 19.08.2021 between the Appellant and FC, where the Appellant decided to transfer all shares in favour of Respondent No.4 or their nominees. Section 7 application has been filed to defeat the Settlement Agreement dated 19.08.2021. It is submitted that Appellants were not aware of the order admitting Section 7 application as they have already exited from the CD. It is submitted that sufficient materials were placed before the Adjudicating Authority to prove that initiation was both collusive and malafide and the Adjudicating Authority committed error in rejecting the application.

Learned Senior Counsel appearing for the FC refuting the submissions of the Appellants submits that the Appellants’ case that they were not aware of the order initiating CIRP dated 15.12.2023, is incorrect. In December 2023 itself in the criminal proceedings in which the Appellant and the CD were both accused, the NCLT order dated 15.12.2023 was noticed. Application under Section 65 was filed in July 2024, after lapse of eight months. No Appeal was filed against the order admitting Section 7 application. It is submitted that FC had already filed a Civil Suit No. 104 of 2021 before the High Court of Calcutta, where the High Court has appointed a Receiver. The Settlement Agreement dated 19.08.2021 was entered, in which all the Appellants were party, and they having been signed the same, the liability of the CD was acknowledged. It is submitted that the Balance Sheets of the CD for 2019-2020 and 2020-2021 have been signed by Appellant No.2 acknowledging the liability. The debt and default occurred during the time when CD was under the management of the Appellants. In the first CIRP which was filed, a Settlement Agreement was entered between the parties on 13.04.2022, where the CD undertook to pay the amount of Rs.2,49,99,330/-. The default having been committed in making the said payment, second CIRP being C.P.(IB) No.309/KB/2022 was filed. The case setup by the Appellants that initiation was malafide and malicious is wholly a bogus plea. It is submitted that Mr. Atish Kumar Shaw, who has filed reply on behalf of the CD, it was on account of the Board Resolution, authorizing Mr. Shaw to file the reply. The Board Resolution and the Power of Attorney both were signed by Appellant No.2. Had Mr. Atish Kumar Shaw, who had given the loan recall notice on behalf of the FC was not a competent person, Board Resolution ought not to have been passed in favour of Mr.Atish Kumar Shaw. It is submitted that Mr. Atish Kumar Shaw was practicing Chartered Accountant and was professionally associated with the FC and the CD. It is submitted that Adjudicating Authority has considered all facts of the case in detail and has rightly rejected the application filed by the Appellants.

We have considered the submissions of learned Counsel for the parties and have perused the records.

On default being committed by the CD in repayment of the amount given by the FC, loan recall notice was issued. Cheques were issued by the CD in August 2020, which were returned unpaid. Civil Suit was filed by the FC in Calcutta High Court being Civil Suit No.104 of 2021, where a Receiver was appointed in June 2021. Earlier Section 7 application was filed by the FC being CP(IB) 361(KB)/2021, in which a Settlement Agreement dated 13.04.2022 was entered, which Settlement Agreement has been brought on the record by the Appellants at Page 981 of the Appeal paperbook. The Settlement Agreement was entered between the FC and the CD, wherein in paragraph (g), (h) and (i), following were stated:

In Paragraph-1 of the Settlement Agreement, the settlement amount and the manner of payment was mentioned. Paragraph-1 of the Settlement Agreement is as follows:

On the basis of the Settlement Agreement dated 13.04.2022, Section 7 application was dismissed as withdrawn on 25.04.2022, which order is as follows:

It was after dismissal as withdrawn of earlier Section 7 application, when cheques given by the CD were dishonoured and amount as agreed was not paid, C.P.(IB) No.309/KB/2022 was filed, claiming default of amount of Rs.4,70,37,016/- and date of default mentioned as 10.07.2022. The Section 7 application was admitted by the Adjudicating Authority on 15.12.2023. In the first Section 7 application, which was filed by the FC alleging default, a Settlement Agreement was entered on 13.04.2022 between the CD and the FC, where CD undertook to make the payment. The cheques issued by the CD having been dishonoured, a default was committed by the CD in honouring its commitment, second Section 7 application being C.P.(IB) No.309/KB/2022 was filed on 29.09.2022. In the facts of the present case, submission of the Appellant cannot be accepted that initiation of Section 7 application was malicious and fraudulent. The default was committed by the CD at the time when Appellants were in the management of the CD.

The submission which has been much pressed by learned Counsel for the Appellant is that recall notice dated 10.09.2020 on behalf of the FC was signed by one Mr. Atish Kumar Shaw, who affirmed and verified the reply affidavit filed by the CD. It is the case of the Appellant itself that Board Resolution was passed on 05.10.2021 by the CD, where Mr. Atish Kumar Shaw was authorized to sign, verify and represent the CD before the NCLT and NCLAT. The copy of the Board Resolution, which is at Page-579 of the Appeal paperbook, shows that the said Board Resolution was also signed by one of the Appellant. The CD having by Board Resolution authorized Mr. Atish Kumar Shaw to appear before the NCLT, no objection can be taken on behalf of the Ex-Directors of the CD that Mr. Atish Kumar Shaw could not have filed reply in Section 7 application. It has been submitted on behalf of the Respondent that Mr. Atish Kumar Shaw is a practicing Chartered Accountant, who was associated with both FC and the CD. Giving loan recall notice on behalf of the FC, cannot be a reason to hold that initiation of Section 7 application by FC was fraudulent and malicious. The Board Resolution authorizing Mr. Atish Kumar Shaw on behalf of the CD is subsequent to issuance of loan recall notice, hence, had there any objection with regard to Mr. Atish Kumar Shaw to represent the CD, the Board of the CD would not have passed the resolution. We, thus, do not find any substance in the above submission of the Appellant that initiation of CIRP has to be held malafide and fraudulent.

Learned Counsel for the Appellant has also submitted that Adjudicating Authority committed error in holding that no Appeal having been filed by the Appellant, they could not have filed Section 65 application. Even if, this submission is accepted that non-filing of the Appeal does not affect filing of Section 65 application by the Appellant, the Adjudicating Authority has considered the issue on merits and an Issue No.2 was framed, ‘whether the initiation of CIRP in C.P.(IB) No.309/KB/2022 was fraudulent, malicious or a collusive proceeding?’. The issue having considered and answered holding that Applicant has not produced any material that satisfies the strict standard of proof required under Section 65. We, thus, are of the view that Adjudicating Authority did not commit any error in rejecting application Section 65 application filed by the Appellant praying for rejection of Section 7 proceedings and recall of admission order dated 15.12.2023.

There is no merit in the Appeal. The Appeal is dismissed. Parties shall bear their own costs.