Arvind Garg Liquidator Of Carnation ... vs Mr. Jagdish Khattar & Others

IN THE MATTER OF: Arvind Garg Liquidator of Carnation Auto India Pvt. ...Appellant Ltd.

Versus

Jagdish Khattar & Ors. ...Respondents

Present: For Appellant : Mr. Kamal Mehta, Jasmeen Sharma, Advocates Mr. Arvind Garg Liquidator in person,

For Respondents : Ms. Varsha Banerjee, Adv. for R1 Mr. Arun Kathpalia, Sr. Adv. Mr. Satendra K. Rai, Advocates for R9 Jai Anant Dehadrai, Adv for R8 Mr.Krishnendu Datta, Sr. Adv, Mr. Anuj Berry, Mr. Aryan Agrawal, Adv for R10

ORDER

Per - Justice Rakesh Kumar Jain (Oral)

08.08.2023 This appeal is directed against the order dated 24th July,

2020 passed by the 'National Company Law Tribunal, New Delhi Bench -VI'

(hereinafter referred as to 'the Adjudicating Authority') by which an

application bearing IB No-302/(ND)/ 2017 filed under Section 43,45,50 & 66

of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred as to 'The

Code') by the Liquidator for avoidance of transactions has been dismissed.

2. The Liquidator has sworn an affidavit dated 02.08.2023 and placed on

record of this case in which he has averred that he has impleaded the nominee

Directors as party only to avoid any kind of a technical objection to arise in

Comp. App. (AT) (Ins) No. 743 of 2020 2

future but it is submitted that the names of the said nominee Directors may

be deleted from the array of the parties with liberty to the Liquidator to

implead them afresh, if at any stage, any incrementing material is found

which would reflect their participation in the decision making of the Corporate

Debtor in respect to the transactions which qualify to be a part of the

avoidance report.

3. It is pertinent to mention that in the present appeal the Appellant has

impleaded as many as 17 Respondents out of whom Respondents

No.4,5,7,8,9,10,12,13,14,15, 16 & 17 are the nominee Directors.

4. In view of the aforesaid affidavit of the Liquidator (Appellant),

Respondents No.4,5,7,8,9,10,12,13,14,15, 16 & 17 are hereby deleted from

the array of the Respondents with a rider that, in case, if at any stage, any

incrementing material is found which would reflect their participation in the

decision making of the Corporate Debtor in respect to the transactions which

qualify to be a part of the avoidance report then the Appellant shall have a

right to file an appropriate application to implead the nominee Directors, who

are being deleted from the array of the parties today as a party Respondents.

5. Needless to mention that in case any such application is filed then the

Nominee Directors shall have every rights to contest the same.

Comp. App. (AT) (Ins) No. 743 of 2020 3

Comp. App. (AT) (Ins) No. 743 of 2020

6. This appeal is directed against the order dated 24th July, 2020 passed

by the 'National Company Law Tribunal, New Delhi Bench -VI' (hereinafter

referred as to 'the Adjudicating Authority') by which an application bearing IB

No-302/(ND)/ 2017 under Section 43,45,50 & 66 of the Insolvency and

Bankruptcy Code, 2016 (hereinafter referred as to 'The Code') filed by the

Liquidator for avoidance of transactions on the basis of Forensic Audit Report

submitted by M/s.K.G.Somani & Co., Chartered Accountants, has been

dismissed.

7. Counsel for the Appellant vehemently argued that the impugned order

does not reflect the application of mind on the issues involved and is not a

speaking order. He has reference to para 5 &6 of the impugned order by which

the application has been dismissed.

8. On the other hand, counsel for the Respondent has submitted that the

findings recorded by the Adjudicating Authority does not require any

interference because no case is made out even on the basis of the application

filed by the Liquidator under Section 66 of the Code, therefore, the impugned

order may not be set aside only on the ground that impugned order is not

speaking.

9. Respondent No.6 also has a grievance that he has been unnecessarily

impleaded as a party in this appeal as he was only an Independent Director

and has resigned about 3½ years before the initiation of CIRP.

Comp. App. (AT) (Ins) No. 743 of 2020 4

10. We have heard counsel for the parties and after perusal of the record,

are of the considered opinion that the impugned order is not a speaking order

because the Adjudicating Authority has not dealt with all the aspects of the

matter which have been referred to in the impugned order prior to taking

decision in para 5 & 6. It is not clear as to how the Adjudicating Authority has

come to the conclusion that the Forensic Audit Report has not been conducted

by the Auditor as per the procedure and therefore, the Auditor has not come

to the proper conclusion.

11. We have specifically asked counsel for the Respondent as to what is the

procedure which has to be followed for the purpose of Forensic Audit to which

she feigned ignorance.

12. Be that as it may, we are satisfied that the manner in which the

application of the Liquidator has been dismissed by the Adjudicating

Authority is not appropriate and, therefore, the impugned order is totally

untenable. Consequently, the present appeal is hereby allowed. The impugned

order dated 24.07.2020 is set aside. The matter is remanded back to the

Adjudicating Authority.

13. The Adjudicating Authority is directed to decide the application once

again after taking into consideration all the aspects by passing a speaking

order in accordance with law. The parties are also directed to appear before

the Adjudicating Authority on 16th August, 2023.

14. Needless to mention that Respondent no.6 shall also have a right to

raise an issue before the Adjudicating Authority of its impleadment in the

Comp. App. (AT) (Ins) No. 743 of 2020 5

litigation as according to him he had already resigned before the initiation of

CIRP. In case, any such objection is raised by Respondent No.6, the

Adjudicating Authority shall deal with the same.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Naresh Salecha] Member (Technical) Raushan/Ravi

Comp. App. (AT) (Ins) No. 743 of 2020