Kamal Agarwal vs Guatam Saha IA (IBC)/17/GB/2022 In CP (IB)/3/GB/2020
Facts:
1) Interlocutory Application i.e. IA (IBC)/17/GB/2022 has been filed under Section 66 of the Insolvency and Bankruptcy Code, 2016.
Issue: Whether application can be allowed ?
Arguments:
Applicant:
1) Counsel submitted that There is a fraudulent transaction undertaken on 01.02.2019 by the Respondent no 1 and 2 (Suspended Directors) in collusion with the Respondent no 3 (Potential Coaching Institute Pvt Ltd) with a malafide intent and ulterior motive of defrauding the creditors of the corporate debtor
2) It was submitted that the nature of the fraudulent transaction undertaken on 01.02.2019 is that the corporate debtor was made to enter into partnership with Respondent no 3 to form a partnership firm “Potential and Concept Educations” with equal profit sharing ratio and thereafter barely a week later, vide deed of agreement dated 08.02.2019, there was a transfer of all the assets of the Corporate Debtor including the right to use of the most valuable asset, i.e., the Trade Mark “CONCEPT Educations” along with all furniture, fixture and electronics for a mere Rs 10 Lakh only to the partnership firm. The implication of the transaction is that the corporate debtor is now having no asset with itself.
3) The pre-designed conspiracy and fraudulent intentions of the Respondents no 1 to 9 are also evident from the fact that the main petition was filed for a mere default of Rs 3,48,000/- and corporate debtor remained ex-parte in the main petition. It is also observed by this Tribunal at para 3 in the admission order dated 26.02.2020.
4) The beneficiaries at the cost of the Corporate Debtor are R1 to R9 and therefore are jointly and severally liable to contribute to the assets of the Corporate Debtor to the extent of unsatisfied claim along with the fees and expenses incurred by the ex-RP.
Respondent:
1) Counsel submitted that the Applicant has made mere allegations of fraud without accompanying the same with substantial evidence before the Tribunal and hence, the Applicant has failed to meet the threshold required under Section 66 of IBC, 2016. The absence of sufficient transaction tracking and supporting documents renders the allegations of fraud speculative at best and undermines the integrity of the insolvency proceedings.
2) Section 66 of the IBC is applicable only to fraudulent/wrongful trading during the CIRP or during a subsequent liquidation process, if at all initiated and not regarding past transactions. Even if Section 66 of the IBC applied to past transactions, unlike Sections 44, 48 and 51, IBC (under which the NCLT, as Adjudicating Authority, can avoid past transactions), under Section 66, the NCLT cannot avoid past transactions, even if fraudulent, but under Section 66(2) can only direct the Director/partner of the Corporate Debtor, and not other parties to the transaction, to make contribution to assets of the Corporate Debtor.
Decision: NCLT dismissed the application.
Rationale:
1) NCLT held that during the course of business of CD, the Suspended Directors have carried on business in a reckless and negligent manner. From buying of a luxury car on account of CD for personal use to entering into partnership with another coaching institute and thereby transferring its assets, including the right to use their trademark, which then had to be cancelled effectively by this Tribunal vide their Order approving the Resolution Plan, the Suspended Directors i.e., Respondent No. 1 and 2 did attempt to maliciously use and siphon the funds of CD for their personal benefit.
2) It however noted that despite the skepticism of this Bench with respect to the intention to defraud, we find that there still has been failure on part of Ex-RP to make a firm determination enumerating the alleged fraudulent transactions
3) It held that Even though, the Transaction Auditor had suggested numerous transactions to be fraudulent in his report, Ex-RP has failed to showcase an independent opinion formed by him citing the transactions to this Tribunal. While submitting that there has been diversion of funds and the amount sought for contribution by the Respondents in prayer, Ex-RP has been deficient in actually quantifiably and conclusively determining the true amount such alleged diverted funds. Had the Ex-RP even identified few transactions from the list given by the Transaction Auditor, this Bench would have been inclined to look into the same. The matter at hand has left us only with the perusal of qualitative evidence and no quantitative evidence.
Order:
