Mrs. Renuka Devi Rangaswamy Vs. M/s. Regen Powertech Private Limited & Ors.
Comp. (AT) (CH) (Ins) No. 357 / 2022 & IA/814/2022
Facts:
1.CIRP was initiated against the Corporate debtor vide order dated 19.02.2020 and applicant was appointed as the IRP and subsequently RP.
2.Applicant gone through financial statements of the corporate debtor and the balance sheet available and noted certain assets on the book and subsequently various other documents which shows that 2.03.36 hectares of land in the Morbi District Gujrat was purchased with RISPL funds of Rs.58,25,050 for RPPL and said amount has been transferred from RISPL account to the seller farmer.
3.Applicant filed application under section 66 of the code for fraudulent trading. NCLT dismissed the application and now applicant is challenging the decision.
Issue: Whether the transaction falls under fraudulent trading?
Arguments:
For Applicant:
1.Counsel for the ‘Appellant’ / ‘Applicant’ submits that the ‘Adjudicating Authority (National Company Law Tribunal’, Division Bench – II, Chennai) had failed to appreciate that there is no ‘Moratorium’, as per Section 14 of the Insolvency & Bankruptcy Code, 2016, in force, against the 1st Respondent / M/s. Regen Powertech Private Limited.
2.It was submitted that AA should have seen that the ‘Sale Consideration’ for the purchase of the ‘Land’ was paid by the ‘Appellant’ / ‘Applicant’ / RISPL’, but the ‘Land’ was registered in the name of the1st Respondent / M/s. Regen Powertech Private Limited’, and further that the ‘Respondents’ had indulged in a ‘Fraudulent Transactions’ with an intent to ‘Defraud’ the ‘Creditors’ of the ‘Corporate Debtor.
3.Also AA failed to appreciate that the ‘Documents’ submitted by the ‘Appellant’ / ‘Applicant’ establishes the fact that the second and third Respondents, in respect of exercising due ‘Pleadings’, in maximising the ‘Potential Loss’ to the ‘Creditors’ of the ‘Corporate Debtor’ had transferred the ‘Land’ of the ‘Corporate Debtor’ and ‘Registered’ the ‘Land’ in the name of the `1st Respondent / Company
4.It submitted that transfer of assets within the group companies falls within the ambit of fraudulent trading under section 66 of the code and committed an error in placing ‘reliance’ heavily on the ‘Forensic’ and ‘Audit Report’, without adverting to the ‘Statutory Documents’, ‘Registers’, ‘Bank Statements’, ‘Records of Rights’ and ‘Sale Deed’, produced along with the ‘Application’.
Respondent:
1.It was submitted that depending upon the ‘Business Requirements’ and various ‘Rules and Regulations’ prevailing at that point of time, in numerous stages, the ‘Lands’ were required either by the ‘Appellant Company’ / ‘Subsidiary Company’, because each ‘State’ had different ‘Rules’. As a matter of fact, the `1st Respondent / M/s. Regen Powertech Private Limited / Holding Company’ of all Companies, it was the ‘Prime Holding Company’, many times for the ‘most Long Term Assets’.
2.All ‘Transactions’ between the ‘Companies’ as well as the ‘Assets’ details were all maintained in a ‘complete transparent manner’ on an ‘SAP’ system (including the Fixed Assets Register) and ‘Intra Group Transaction’ were also maintained in ‘SAP’.
3.It also submitted that everything in both the Companies shall benefit with the knowledge of the respective ‘Bankers’ and the ‘Resolution Professionals’ can refer to the relevant ‘Documents’, being available at the ‘Registered Office’ of both the Companies. For any clarification, relating to the ‘Transaction’ questioned and the same were not in their possession.
Decision:
Rationale:
1.Tribunal held that it must be borne in mind that whenever a ‘Fraud’ on a ‘Corporate Debtor’ is committed, in the course of carrying ‘business’, it does not necessarily mean that the ‘business’ is being carried on with an intent to ‘defraud’ the ‘Creditors’. In this connection, this ‘Tribunal’ pertinently, points out that if the ‘Directors’ of a ‘Company’ had acted on a bona-fide belief that the ‘Company’ will recover from its ‘Financial Set Back’ / ‘Difficulties’ / ‘Problems’, then, it will not be liable for the ‘Act’ / ‘Offence’ of ‘Fraudulent Trading’, in the considered opinion of this ‘Tribunal’.
2.Director’ of a Company’, can be proceeded against, for a Wrongful Trading’, on account of Negligent Failure of Management’. An Individual’, knowingly being a Party’ to a Fraudulent Trading’ by the Company concerned, may be subject to the Proceeding’.
3.A High Level Proof’, is very much required in regard to a ‘Fraudulent Intent’. Even for an ‘Isolated’ / ‘Single Fraud’, against an Individual’, the action, in ‘Civil Wrong’ (Tort) will lie. Furthermore, a ‘Creditor’, who was ‘Defaulter’ has a viable’, effective’, an efficacious’ ,alternate remedy’ in ‘Civil Law’. In this connection, this Tribunal’, pertinently points out that it is not open to the Directors’ of a Company’ accused of Fraudulent Trading’ to allege that the Company’s Claim’ for recovery in Tort’, are barred.
4.It is the Obligatory Duty’, on the part of the ‘Appellant’ to prove the subjective satisfaction of this ‘Tribunal’ that 1)An Individual’, must be knowingly carrying on the business with the ‘Corporate Debtor’, 2) Such an Individual’, ought to have a ‘Dishonest Intent’, to Defraud’ the ‘Creditors. It must be borne in mind, that for Fraudulent Trading’ /Wrongful Trading’, Relevant Facts’ /Acceptable Materials’, are to be pleaded by a Party’, by providing requisitedetails’ / adequate `facts, to fall within the parameters of Section 66 of the I & B Code, 2016.
5.All ‘Transactions’ between the Companies as well as the ‘Asset’ details were maintained in a ‘Transparent Manner’ on an SAP System’ (including theFixed Assets Register’) and further the ‘Transactions’ of the ‘Corporate Debtor’ and the ‘1st Respondent’ were `Audited’, every year, the ‘Plea’ of ‘Fraudulent Trading’ as projected by the ‘Appellant’ / ‘Applicant’ is not proved, to the subjective satisfaction of this ‘Tribunal’, in a ‘convincing manner.
Order Copy: