Vasudevan Gopu vs Baskaran Sathya Prakash & Anr.

Under Adjudication is the Application filed by the Applicant Resolution Professional seeking the following relief:-

It is stated that CIRP of the Corporate Debtor was initiated by this Tribunal vide order dated 19.09.2018 in CP/185/CHE/2018. Subsequently, liquidation was ordered against the Corporate Debtor vide an order dated 24.03.2021 in MA/1398/2019.

It is stated that, without any commercial transactions between R1 and the Corporate Debtor, amounts of Rs.2.43 crore and Rs.5.0 Lakh were transferred on 02.08.2017 & 22.03.2017 respectively to the account of R1 from the current account of the Corporate Debtor.

It is stated that, without any commercial transactions a total of Rs.35.0 Lakh was transferred to R2 on various dates, which are as follows:

It is stated that Mr. Baskaran Sathya Prakash (R1 herein) was the director of the Corporate Debtor from 25.05.2015 to 01.08.2017 and his wife Mrs.Rathnamala (R2 herein) was a shareholder, holding 2500 equity shares of the Corporate Debtor.

The Applicant has attached the copies of the bank statements of the Corporate Debtor as Appendix A to the Application typeset.

The Respondents have filed the Reply/Counter statements.

It is stated that, R1 was one of the Directors of the Corporate Debtor from 25th May, 2015. He was then appointed as the Director (Operations) with effect from 1st August, 2015 on a remuneration of Rs. 5,00,000/- per month till his last working day ie.,31.07.2021.

Subsequently, R1 was paid a total remuneration of Rs.1,20,00,000/-. After deducting TDS of Rs.40,42,106/-, a sum of Rs79,57,894/- was paid but the TDS was not remitted. (Copy of Income Tax Returns and acknowledgement for having filed are enclosed as Exhibit-3 of the Application typeset.)

It is stated that, a Sum of Rs.20,00,000/- was due to R2 towards unsecured interest free short term loan repayable within 3 months from the date of disbursement, extended by her, as the company was facing financial crisis.

It is stated that R2 issued cheques and transferred money by way of NEFT to the Company aggregating to Rs.55,27,067/- (Rupees Fifty Five Lakhs Twenty Seven Thousand and Sixty Seven Only) between 17.6.2017 and 14.7.2017. The funds were either transferred from M/s. Rasiksas, wherein R2 was the Sole Proprietor or the Personal Bank Account.

It is stated that the sum of Rs.35.0 Lakh was paid in the normal course of business that too without interest. The repayments were made as per the agreed terms and the allegations of the Applicant that these are ‚Preferential Transaction" are false, misconceived and imaginary. Date wise remittances as averred in the Reply statement of R2 is extracted hereunder

It is stated by R1 and R2 that, the transactions were done in the normal course of business and the allegations of the Applicant that they are preferential in nature, are vexatious.

It is stated that, R1 has not produced any proof to substantiate that, his salary was not remitted on a monthly basis.

In para (e) of the rejoinder it is stated that, TDS has not been remitted by the Government exchequer and as per the provisions of the Income tax act, 1961, the Tax Deducted at Source (TDS) on salary has to be remitted on monthly basis whether or not the salary has been paid.

It is stated that, the company always makes payment from its current account for all the business activities and R1 alleging that he paid on behalf of the company from his personal account is totally false and cannot be considered as a commercial transaction done on behalf of the Corporate Debtor.

It is stated that from the bank statement of the Corporate debtor it is seen that the Company had availed loans to the tune of Rs.1.0 crore and Rs.5.0 crore and which were enhanced to Rs.7.0 crore during the year(s) 2015 and 2016 and one can presume that the Company had sufficient funds to meet out its expenses including the working capital expenses. Per contra, R1 claims that the Company was facing financial difficulties and hence he spent the money from his pocket for every expenses.

It is stated that, in the invoices appended to the reply the Respondents have also included the bills relating to his personal expenses and they are fraudulently claiming it as the money spent on behalf of the Corporate Debtor.

Heard the submissions made in detail. The relevant section is extracted hereunder for reference:-

Sub – section (2) Section 43 of IBC, 2016 lays down the scope of preference given by the Corporate Debtor, which is as follows;

The Applicant has sought reversal of the amount paid by the 1^st & 2^nd Respondent under different heads which are detailed as follows;

From the above table, in so far as the payment of remuneration, it is seen that the 1^st respondent was the Director of the Corporate Debtor. He resigned from the said post on 01.08.2017. On account of his employment, he was paid salary by the Corporate Debtor. The 1^st Respondent in support of the contention has placed on record his Income Tax Returns which show that the TDS was deducted for the payment of the salary to the 1^st Respondent. In any case the payment made to the 1^st Respondent cannot be treated as Preferential Transaction since payment of salary to the Directors comes within the ambit of ‘ordinary course of business’ and is notified to any creditor or a guarantor as provided in Section 43 (2) of the Insolvency and Bankruptcy Code ,2016. Thus, the sum of Rs.1,20,00,000/- does not fall within the purview of ‘Preferential Transaction’.

In relation to 2^nd head, it is seen that the 1^st Respondent had made various payments to the Creditors of the Company to the tune of Rs.1,51,33,332/- out of which the Corporate Debtor reimbursed a sum of Rs.1,48,42,106/-. In support of the same, the 1^st Respondent has produced the bills and invoices which are annexed at page no. 13 to 106. It is stated that the Corporate Debtor instead of paying the amount directly to the Operational Creditors, has made the 1^st Respondent to pay the Operational Creditors and thereafter the Corporate Debtor transferred the amount to the 1^st Respondent. Thus, as per Section 43(1)(b) of Insolvency and Bankruptcy Code , 2016 the transfer of amount by the Corporate Debtor to the 1^st Respondent has the effect of putting 1^st Respondent in beneficial position than it would have been in the event of a distribution under section 53 of Insolvency and Bankruptcy Code, 2016. Further, no documents have been placed by the 1^st Respondent to show that the said transfers were made during the ordinary course of business. Hence, the said transaction squarely falls under Section 43 of IBC, 2016.

In so far as the 2^nd Respondent is concerned, (who is the wife of the 1^st Respondent), it is seen that she herself has admitted that a sum of Rs.55.0 Lakhs was given as Loan by her to the Corporate Debtor as Unsecured Interest Free Short Term Loan repayable within 3 months from the date of disbursement. However, the 2^nd Respondent has not placed on record any document to prove the disbursement of Unsecured Interest Free Short Term Loan, other than copy of the bank statement. It is seen that the Corporate Debtor has repaid a sum of Rs.35.0 Lakhs to the 2^nd Respondent. Under Section 43(1)(b) of Insolvency and Bankruptcy Code , 2016 if the transfer of amount by the Corporate Debtor has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution, then that transaction is required to be treated as ‘Preferential Transaction’. Hence, the repayment of hand loan by the Corporate Debtor to R1, to the tune of Rs.20 Lakhs also falls within the ambit of ‘Preferential Transaction’.

In the present case, the 2^nd Respondent is an Unsecured Creditor. As per provisions of Section 53 of Insolvency and Bankruptcy Code, 2016, the 2^nd Respondent is placed below the Secured Financial Creditors. Further, no documents have been placed by the 1^st and 2^nd Respondent to show that the said transfers were made during the ordinary course of business.

Snapshot of the findings given Supra

In the said circumstances, the transaction relating to the 1^st Respondent to the tune of Rs.1,48,42,106/- and for a sum of Rs.20 Lakhs and the transaction pertaining to the 2^nd Respondent for a sum of Rs.35 Lakhs squarely fall within the ambit of Section 43 of Insolvency and Bankruptcy Code, 2016. Hence, in terms of Section 44 of Insolvency and Bankruptcy Code, 2016, we therefore direct the 1^st Respondent to pay a sum of Rs.1,68,42,106/- (Rs.1.48 Crores + 20 Lakhs) and the 2^nd Respondent to pay a sum of Rs.35 Lakhs to the Applicant within a period of 30 days from the date of this order.

Accordingly, MA/653/2018 stands disposed of.