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Judgment
Per: Chandra Bhan Singh, Member (Technical)
ORDER
This Application has been filed by the Resolution Professional of Man Tubinox Ltd u/s 14(1)(b) r/w Section 66 of the IBC, 2016 for reversal of transaction illegally conducted by handing over the property of the Corporate Debtor to the Respondents M/s Man Tubinox Ltd during the Moratorium period.
The Admission of the Petition was heard on 29.03.2019 and the same was Reserved for Orders. However, the Order was pronounced on 12.06.2019 and the Interim Resolution Professional (IRP) was appointed on the same date. Therefore, it is very evident to this Bench that when the Order was Reserved on 29.03.2019, the Corporate Debtor was well aware of the impending CIRP in the matter.
In his Application the RP mentions that the Corporate Debtor holds lease right over an area admeasuring 61629.44 sq. mtrs located at Plot No.847, Sector III, Industrial Area, Pithampur, Dist. Dhar, Madhya Pradesh. This lease hold right was obtained from Madhya Pradesh Audyogik Kendra Vikas Nigam (MPAKVN), Indore and the lease deed was executed on 22.06.2015 for a period of 30 years. This lease deed was to expire on 21.06.2045.
The Resolution Professional has submitted that the Corporate Debtor entered into a Sub-Lease Deed dated 01.04.2019 with another Company viz. Maan Tubes Ltd for assigning a lease hold right in respect of 25,261.25 sq. mtrs out of the total area of 61,629.44 sq. mtrs which was obtained by the Corporate Debtor from Madhya Pradesh Audyogik Kendra Vikas Nigam (MPAKVN), Indore. The Resolution Professional contends that this Sub-Lease Deed was executed with a mala fide intention by the suspended Directors of the Corporate Debtor with the objective to leave the creditors without this asset. The RP mentions that Maan Tubes Ltd is a ‘related party’ of the Corporate Debtor on the ground that, one of the directors of the Maan Tubes Ltd, Mr. Jagdish Ishwar Manik is also a Director/ Promoter of the Corporate Debtor. It is also to be noted that Mr. Jatin Ishwar Manik has been the Director in Maan Tubes Ltd from 15.03.2019 till 03.01.2020.
This Bench notes that the lease deed dated 25.06.2015 entered into by the Corporate Debtor with NPAKVN did not allow any sub-lease except as provided in the said lease. Relevant extract of the Agreement Clause 25 and 26 is reproduced below:-
“Cl. 25:- The Lessee shall not sublet, assign or otherwise transfer the said premises/ land or any part thereof or any building constructed thereon for any purpose whatsoever, except as provided in the said rules.
Cl. 26:- The Lessee shall not change the construction of ownership of the unit without the prior permission of the lessor in writing and shall pay the required fee/ chargers as per the provisions of the said rules.”
This Bench further notes that Madhya Pradesh Industrial Development Corporation, Indore allowed Sub-lease to Maan Tubes Ltd by an Order dated 29.06.2019 based on an Application dated 06.06.2019 surreptitiously made by the ex-Promoter of the Corporate Debtor. The Bench notes that the Company Petition was reserved on 29.03.2019 and the Sub-lease was signed on 01.04.2019 on a letter of request from the Promoters on 06.06.2019. This, as per the Bench, is an express violation of Section 66 of the IB Code which reads as under:-
“66.Fraudulent trading or wrongful trading. -- (1) If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intend to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit.
(2)On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit, if —
(a)before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reasonable prospect of avoiding the commencement of corporate insolvency resolution process in respect of such corporate debtor; and
(b)such director of partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor.”
It is clear to this Bench that the Respondent No.1 to 4 who are suspended Directors of the Corporate Debtor Company, i.e. Mr. Vinod Kuwadia, Mr. Jagdish Jamaklal Mansukhani, Mr. Narendra Kumar Tripathy, Ms. Nirmala Tugnawat were aware that the Petition was Reserved for Orders and just before the Insolvency commencement date, when they knew that there is no reasonable prospect of avoiding the CIRP in respect of the Corporate Debtor Company, carried on with the intent of defrauding the creditors of the Corporate Debtor Company by sub-leasing a large chunk of the only asset of the Corporate Debtor to a related party who happens to be the son-in-law of one of the suspended Directors.
The Bench has no doubt in its mind that the suspended Directors were fully aware of the impending CIRP and also knew that restrictions under Section 14 of the Insolvency Code would kick in. Therefore, just before the commencement of the CIRP, in total violation of Section 66 of the Code, entered into a Tripartite Agreement with a related party, Maan Tubes Ltd. It is also important to note that when the sub-lease was granted on 29.06.2019, they did not inform the Madhya Pradesh Industrial Development Corporation that the Sub-lease is null and void as the Corporate Debtor which has Sub-leased the property is no longer with the original promotors but with the Interim Resolution Professional/ Resolution Professional. It is also, therefore, clear that M/s Maan Tubes Ltd has concealed information from the Madhya Pradesh Industrial Development Corporation in defrauding the creditors of the Corporate Debtor Company.
In view of the above, this Bench Orders the following:-
Cancels the Tripartite Agreement executed on 25.10.2019 during the Moratorium period in violation of Section 14 of the IBC. The Bench further directs the Madhya Pradesh Industrial Development Corporation Limited to cancel its registration of the Tripartite Agreement as Mr. Vinod Kuwadia of Maan Tubinox Ltd has fraudulently and without any authority of the Resolution Professional to whom the responsibility of running the Corporate Debtor has passed u/s 74.
The General Manager, Madhya Pradesh Industrial Development Corporation is also directed to cancel its Order dated 29.06.2019 by which it allowed the Sub-lease of land admeasuring 24,281.2 sq. mtrs to M/s. Maan Tubinox Limited.
This Bench finds that each of the Corporate Debtor ex-director/ promoter have violated Section 66 and also Section 14 of the IBC and, therefore, in terms of Section 74 of the IBC, impose a fine of Rs.5 lakh (Rupees Five Lakh Only). On each of them. This fine will be credited to the bank account of the Corporate Debtor Company within five working days from the pronouncement of this Order.
The RP is directed to file compliance report within 3 weeks of the pronouncement of this Order.