Mr. Jugraj Singh Bedi vs Mr. Ramesh B. Gowda & Anr
IA No. 182 of 2021 in C.P. (IB)No.304/BB/2019
Facts:
1. Corporate Insolvency Resolution Process (CIRP) in respect of the corporate debtor, namely M/s. Green Farm Tech Private Limited, the Applicant herein was initiated vide order dated 20.02.2020 and the applicant was appointed as the RP.
2. Applicant after analysing the transactions in accordance with the provisions of the Code has arrived upon the conclusion that the avoidance transactions amounting to approximately Rs. 38 Crores (Rs. Thirty Eight Crores) have been transacted by the Respondents with the sole objective of defrauding the creditors of the Applicant. The Committee of Creditors (“CoC”) meeting held on 14.05.2021, one of the Agenda was to discuss the Transactional Auditor’s Report and it was resolved that the transactions of the Corporate Debtors are fit to fall under the scope of Sections 43, 45, 50 and 66 of the Code.
Issue: Whether the case under section 66 of the Code is made out ?
Argument:
Applicant:
1. Counsel submitted that there have been several occasions when the Respondents herein have been non-cooperative towards the Applicant and have tried to delay the process by making false promises to cooperate and then have refused to provide the necessary documents to the Applicant.
2. Counsel submitted that M/s B.V Swami and Co, Chartered Accountants, submitted their Transaction Audit Report of the Applicant. It was submitted that Respondents resorted to a well-known method of fraud by first issuing debentures and subsequently withdraw large sums in cash on a daily basis out of the amount received from the debentures. These amounts withdrawn in cash are huge sums, and they can’t be written off in the books of account; when the creditors were yet to be paid back the amounts invested in the debentures.
3. It was further submitted that Respondents ensured that no agreement was executed to govern the term of the loans, second, despite the Applicant seeking for loan documents on many occasions, the Respondents have failed to submit any documents to substantiate the purpose of the loan advanced.
4. Counsel submitted that it is clear that the transactions mentioned above come under the scope of Avoidance Transactions as they are done with an intention to defraud the Creditors/ Claimants, these transactions are made to related parties and are cash withdrawals, which have been written off, therefore this attracts section 66 of the Code.
Decision: NCLT allowed the application.
Rationale:
1. NCLT noted that dates of receipt of the money through debentures and the immediate withdrawal in cash reveals a glaring pattern; which the Resolution Professional has categorised to be fraudulent withdrawal of cash; which is subsequently written off in the Books of Accounts.
2. It held that Respondents have not been able to properly explain the nature and purpose of such cash withdrawal and payments and there is no justification for these cash payment have been given. In the Transaction Audit Report reproduced above at Para 3, it is commented by the Auditor that question which remained unanswered as to why cash was withdrawn for making the advances to the related parties instead of giving them Cheques/through Bank.
Order:
