Mr T.S. Murali (Ex Director) &Ors vs. Liquidator of Helpline Hospitality Pvt Ltd
COMPANY APPEAL (AT)(INSOLVENCY) NO.234 OF 2021
Facts:
1.On 21.03.2017 an application under Section 9 of the Code was filed for initiation of Corporate Insolvency Resolution Process (hereinafter referred to as the ‘CIRP’) against M/s Helpline Hospitality Pvt Ltd which was admitted on 24.04.2017 and due to failure of CIRP liquidation proceeding was initiated.
2.Forensic Audit Report was submitted wherein it was found that the company/corporate debtor and its directors were liable for prosecution under various provisions of the IPC, Companies Act, 2013 and other relevant laws mainly on the finding that fraudulently diversion of funds from source company Helpline Hospitality Pvt Ltd was done to create personal estate of directors at Noida worth Rs.65,29,836/-
3.It was noticed that company/corporate debtor had taken a loan of Rs.36,59,250/- vide agreement dated 30.04.2004 for a tenure of 104 months period which ended on 22.07.2013 for assets located at Plot No.G-158, Sector 41, Noida UP. However, the said asset was got registered in the name of Appellant No.1 Those facts were not addressed by auditors in their audit reports for financial 2004-05 to 2013-14. The amount withdrawn from the company account for creating their personal wealth was treated as siphoning of money and cheating, fraud, misrepresentation of facts to company financial position.
4.The total amount diverted as a consolidated instalment in view of loan statement taken from ICICI Bank dated 30.08.2018 was Rs.6529,836.56. The estimated value of the above said property as per special audit report was Rs.4 crore which was created from the funds of company moving fraudulently for repayment of the loan taken for purchase of this house. The special audit report observed that the said house shall be transferred to company immediately to safeguard the interest of stakeholder
5.Application was filed for seeking transfer of property by liquidator which was allowed and application for review was filed which was reserved for order on 14.01.2020 and appellant filed appeal before the review order which was dismissed on 13.03.2020. Review application was also dismissed on 26.02.2021 and appellant is challenging the order.
Issue: Whether order passed by the AA was correct?
Arguments:
For Appellant:
1.Counsel submitted that index of application reflects that the said petition was filed by the Liquidator under Section 25(2)(J) read with Section 66 of the Code. By way of placing Section 25(20(J) of the Code, he submits that under such provision there was no reason for entertaining petition by the NCLT. He further submits that the application filed before the NCLT by the Liquidator was contrary to provisions of the IBC and as such earlier order i.e. order dated 20.12.2019 passed in Company Application No.840/2018 by the NCLT was not sustainable in the eye of law
2.He has further referred to Section 43(4), 44, 45 and 46 of the Code to satisfy this Tribunal that NCLT has incorrectly entertained the petition filed by the liquidator and passed order dated 20.12.2019. He has further argued that the order dated 20.12.2019 was passed contrary to the record
3.He submitted that Adjudicating Authority has further committed serious jurisdictional error in interfering with the property which was registered in the name of the appellant and the Adjudicating authority has stated treating the said property as Benami Property. It has been argued that the Adjudicating Authority was not having any jurisdiction to interfere with the Bemani property. Since the jurisdiction for such dispute was lying in the competent court under the Benami Transaction (Prohibition) Act, 1988.
4.he contended that there was apparent error which was on record the learned Adjudicating Authority exercising its jurisdiction under Section 420(2) of the Companies Act, 2013 was well within its jurisdiction to rectify the same. However, the Learned Adjudicating Authority only on the ground that under Rule 11 of the NCLAT Rules exercising inherent jurisdiction was not competent to review earlier order rejected the review petition. He contends that the Adjudicating Authority has further committed error in not exercising its review jurisdiction and correcting the earlier order
For Respondent:
1.It was submitted that appellant maliciously and only with a view to continue with the property in question, which was admittedly purchased on the fund of Corporate Debtor, has generated the litigations by filing the review petition as well as approaching this Appellate Tribunal simultaneously
Decision: Appeal was dismissed and order passed by AA was upheld.
Rationale:
1.Tribunal noted that purchase of the property in question, loan was obtained in joint name of company/corporate debtor and both the appellants. It is also not in dispute that the loan amount was repaid from the account of the corporate debtor/company. It has also been noticed that after getting the said property registered which was purchased from the fund of corporate debtor, sometime in the year 2006 both the appellants tendered resignation as directors of the company. However, subsequently it has been noticed by the competent authority that the said company was being run by both the appellants.
2.Tribunal held that levelling of section does not matter if a petition is filed before the Court having jurisdiction to deal with the same. Besides referring sub-section 25(i)(j) the petition itself reflects that it was also filed under Section 66 of the Code
3.It was noticed that in relation to registration of property in the name of appellant fraud was committed. Loan for the purchase of the said property was taken on the joint agreement of appellants as well as corporate debtor and thereafter entire loan amount was repaid from the corpus of the corporate debtor itself and as such it can be inferred that by committing fraud the property was got registered in the name of Appellant No.1. Accordingly considering the fraud which was noticed in the Forensic audit report the appellant is not entitled to raise question of limitation
4.Neither under Rule 11 of NCLT Rules, the NCLT was competent to review/recall its earlier order nor Section 420 of the Companies Act was applicable in view of the fact and circumstances of the case particularly the fact that the liquidation proceeding was continuing under the provisions of the IBC Code.
Order copy:
