Bharat Heavy Electricals Liimited vs Anil Goel (Resolution Professional) & ...

IN THE MATTER OF: Bharat Heavy Electricals Ltd. ...Appellant

Versus

Anil Goel Resolution Professional Ideal Energy Projects Ltd. & Ors. ...Respondents

Present: For Appellant : Mohd. Azeem Khan and Mr. Ishani Mukherjee, Advocates

For Respondent : Mr. Amar Vivek, Mr. Dhananjay Sud, Mr. Aditya Gauri, Mr. Chaitanya Bansal, Mr. Shalya Agarwal and Mr. Abhinav Tyagi, Advocates for RP/R-1

ORDER

(Virtual Mode)

26.07.2022 This appeal is directed against the order dated

10.08.2021.

2. In brief, the Resolution Professional filed an application under Sections

14, 17, 19 and 74 of the Insolvency and Bankruptcy Code, 2016 (in short

'Code') read with Rule 11 of the NCLT, Rules, 2016 praying therein that an

order may be passed directing BHEL/and or suspended directors to return

the amount of Rs. 87,50,000/- which is paid to them on 18.02.2020 after

initiation of CIRP of the Corporate Debtor and to pass an order against the

suspended directors of the Corporate Debtor in terms of Section 74 of the

Code for making such transactions in violation of Section 14, 17 and 19 of

the Code. The Adjudicating Authority, vide its impugned order, has issued the directions that "(a) BHEL to reverse the transaction of Rs. 87.50 lakh made

on 18.02.2020. (b) Respondent is directed to file its claim before the IRP.

3. In brief, an application under Section 7 of the Code was filed by

Corporation Bank against M/s Ideal Energy Projects Limited (Financial

Creditor) in respect of an amount of Rs. 492 Crores. The said application was

admitted on 28.01.2020. The CIRP proceedings were initiated and Mr. Anil

Goel was appointed as IRP and the moratorium was set in to take effect from

28.01.2020.

4. The Corporate Debtor, out of the liability of Rs.8,00,00,000/-, paid Rs.

4,50,00,000 to the Appellant herein and to discharge the balance obligation

of Rs. 3,50,00,000, handed over 4 post-dated cheques each of Rs. 87,50,000.

The details of the 4 cheques are as under:-

S. No. Cheque No. Date on cheques

1. 663616 18.02.2020

2. 663617 18.03.2020

3. 663618 18.04.2020

4. 663619 18.05.2020

5. At this stage, it is pertinent to mention that the matter pending before

the Adjudicating Authority was reserved on 16.12.2019 and the following

order was passed "both sides present. Counsel for the Corporate Debtor

produced the minutes of consortium dated 06.12.2019 and requested that

the pronouncement of order may be deferred so that they can settle the

Company Appeal (AT) (Ins) No. 965 of 2021 2 of 7 matter. However, the Counsel for the Petitioner opposes the plea. Orders will

be pronounced in the first week of January, 2020."

6. The Appellant presented the first cheque dated 18.02.2020 on due date

and a sum of Rs. 87.50 lakh was transferred from the account of the

Corporate Debtor to its account. The RP has, thus, filed the application in

question bearing I.A. No. 191 of 2021, before the Adjudicating Authority

invoking Section 14 of the Code to contend that once the moratorium was

set in, no amount could have been transferred from the account of the

Corporate Debtor to the account of the Appellant. Counsel for the Appellant

has argued that the impugned order is patently illegal because the cheque

was given to the Appellant on 17.01.2020 much before the order of initiation

of CIRP was passed on 28.01.2020. He has further argued that in case, any

of the provision of the moratorium was violated then the provision of Section

74 of the Code shall be attracted for the purpose of punishment but the

transaction cannot be reversed. He further submitted that the CIRP

proceedings came to its notice on 19.02.2020 when the public

announcement was made by the IRP but before that the cheque dated

18.02.2020 was encashed and transaction was completed.

7. On the other hand, Counsel for the Respondent has submitted that

merely by handing over the post-dated cheques on 17.01.2020 will not clothe

the appellant with the right to withdraw the money from the account of the

Corporate Debtor by presenting the post-dated cheques during the period of

moratorium. It is submitted that in the case of Rishi Kapoor Vs. Kashi

Vishwanathan Sivaraman in Company Appeal (AT) (Ins) No. 966 of 2021, it

has been held that the order has to take effect from the date of his

Company Appeal (AT) (Ins) No. 965 of 2021 3 of 7 pronouncement and in this case the CIRP proceeding were initiated much

earlier than the presentation of the cheque for the purpose of its encashment.

It is further submitted that Section 74 is the punitive provision for violation

of the moratorium but the direction issued by the Adjudicating Authority is

the ultimate solution for a wrong transaction which has taken place with the

collusion of the Corporate Debtor and the Appellant.

8. We have heard Learned Counsel for the parties and perused the record.

9. The issue involved in this case is as to whether the transaction of

encashment of cheque during the period of moratorium is hit by Section 14

of the Code?

10. Before the aforesaid question is answered, it would be worthwhile to

refer to the provisions of Section 14 of the Code, which is reproduced as

under:

"(1) Subject to provisions of sub-section (2) and (3), on the insolvency commencement date, the Adjudicating Authority shall by order declare moratorium for prohibiting all of the following, namely:

(a) The institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b) Transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein;

(c) Any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);

(d) The recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

Company Appeal (AT) (Ins) No. 965 of 2021 4 of 7 (2) The supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.

(3) the provisions of sub-section (1) shall not apply to-

(a) such transaction as may be notified by the Central Government in consultation with any financial regulator;

(b) a surety in a contract of guarantee to a corporate debtor.

(4) The order of moratorium shall have effect from the date of such order till the completion of the corporate insolvency resolution process: Provided that where at any time during the corporate insolvency resolution process period, if the Adjudicating Authority approves the resolution plan under sub-section (1) of section 31 or passes an order for liquidation of corporate debtor under section 33, the moratorium shall cease to have effect from the date of such approval or liquidation order, a the case may be."

11. From the perusal of the aforesaid provision, It is well settled that with

the initiation of the CIRP process, the proceedings of moratorium kicks in,

which is also apparent from the order passed by the Adjudicating Authority

while admitting the application filed under Section 7 of the Code. Para 10 of

the said order is required to be referred to which is reproduced as under:-

"10. This Adjudicating Authority, on perusal of the documents filed by the Petitioner, is of the view that the Corporate Debtor defaulted in repaying the loan availed and also placed the name of the Insolvency Resolution Professional to act as Interim Resolution Professional and there being no disciplinary proceedings pending against the proposed resolution professional, therefore the Application under sub-section (2) of Section 7 is taken as complete, accordingly this Bench hereby admits this Petition prohibiting all of the following of item-I, namely:

I. (a) the institution of suits or continuation of pending suits or proceedings against the Corporate Debtor including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority;

(b) transferring, encumbering, alienating or disposing of aby the Corporate Debtor any of its assets or any legal right or beneficial Interest therein;

Company Appeal (AT) (Ins) No. 965 of 2021 5 of 7

(c) any action to foreclose, recover or enforce any security interest created by the Corporate Debtor in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act);

(d) the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the Corporate Debtor.

II. That the supply of essential goods or services to the Corporate Debtor, if continuing, shall not be terminated or suspended or interrupted during moratorium period.

III. That the provisions of sub-section (1) of Section 14 shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator.

IV. That the order of moratorium shall have effect from 28.01.2020 till the completion of the corporate insolvency resolution process or until this Bench approves the resolution plan under sub-section (1) of Section 31 or passes an order for liquidation of Corporate Debtor under Section 33, as the case may be.

V. That the public announcement of the corporate insolvency resolution process shall be made immediately as specified under Section 13 of the Code.

VI. That this Bench hereby appoints, Mr. Anil Goel, having his address at, 10A, Kailash Colony, Greater Kailash-I, New Delhi, National Capital Territory of Delhi-110048, having Registration No. IBBI/IPA- 001/IP-P00118/2017-18/10253, having email id anilgoel@aaainsolvency.com as Interim Resolution Professional to carry the functions as mentioned under Insolvency & Bankruptcy Code.

11. The Registry is hereby directed to communicate this order to both parties and the Interim Resolution Professional immediately."

12. Thus, in view of the aforesaid facts and circumstances, it is apparent

that the amount of Rs. 87.50 Lakh was transferred from the account of the

Corporate Debtor to the account of the Appellant on 18.02.2020, much after

the initiation of CIRP proceedings which has violated the moratorium. We,

therefore, do not find any error in the impugned order. Thus, the present

Company Appeal (AT) (Ins) No. 965 of 2021 6 of 7 appeal is found to be without any merit and the same is hereby dismissed. No

costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical)

[Dr. Alok Srivastava] Member (Technical)

sc/rr

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