Devamata Commercials Pvt. Ltd vs Mr Manoj Kumar Mishra

IN THE MATTER OF: Devamata Commercials Pvt. Ltd. ...Appellant Versus Manoj Kr. Mishra, RP of Monotona Tyres Ltd. & Ors. ...Respondents

Present: For Appellant : Present but appearance not marked.

For Respondents :

ORDER

(Hybrid Mode)

Per: Justice Rakesh Kumar Jain (J) (Oral)

16.12.2024 : This Appeal is against the Order dated 30.09.2024, by

which an Application filed by the Resolution Professional (RP) of M/s.

Monotona Tyres Limited (Corporate Debtor) has been allowed and Slump

Sale Agreement dated 05.05.2018, entered into between the Corporate

Debtor and the Appellant, has been set aside with direction to the Appellant

to return all the assets acquired by it under the Slump Sale Agreement to

the RP of the Corporate Debtor forthwith, with a liberty to file appropriate

claim with the RP in respect of its debts, if any, including the repayment of

the loan granted by it to the State Bank of India (SBI) on behalf of the

Corporate Debtor.

2. The brief facts of this case are that the Corporate Debtor had obtained

financial assistance in the form of credit of Rs. 21.5 Crores from SBI and

mortgaged its factory along with land situated at Bhiwandi Wada Road, Thane District, Maharashtra. Since the Corporate Debtor defaulted in the

repayment of loan, therefore, SBI initiated proceedings under the SARFAESI

Act, 2002 to enforce its security over the mortgaged property.

3. The Appellant took over the possession of the mortgaged property of

the Corporate Debtor by way of a Lease Deed dated 08.01.2016. The

Corporate Debtor negotiated with the SBI for a One Time Settlement (OTS),

which was agreed at Rs. 12.21 Crores to be paid in 3 tranches. However, it

failed to pay the third and final tranche of Rs. 9.63 Crores, therefore, the

SBI threatened to enforce its security under the SARFAESI Act, 2002. It is

alleged that the Corporate Debtor approached the Appellant for the payment

of third tranche of Rs. 9.63 Crores directly to the SBI and in exchange

agreed to transfer the mortgaged property as a part of a distress sale. It is

further alleged that the Appellant directly paid Rs. 9.63 Crores to the SBI on

behalf of the Corporate Debtor and discharged the Corporate Debtor from its

liability towards the SBI.

4. It is also alleged that the Appellant provided unsecured loan to the

Corporate Debtor in the course of business relationship, totalling Rs. 43.86

Crores, allegedly used by the Corporate Debtor for various operational

purposes such as electricity dues, upkeep and maintenance of the property

and in this manner, the Corporate Debtor owed Rs.53.50 Crores to the

Appellant for which it agreed to sell its entire business, including the

factory, land, machinery, and all other assets for a consideration of Rs.

52.50 Crores and in this regard, entered into a Slump Sale Agreement dated

05.05.2018. It is also alleged that an Affidavit in this regard was also filed

by the Corporate Debtor in the High Court of Bombay in Chamber Comp. App. (AT) (Ins.) No. 2300 of 2024 & I.A. No. 8653 of 2024 2 of 6 Summons No. 873/2018 in Execution Application No. 1765/2018

(`Capital First Ltd.' Vs. `Monotona Tyres Ltd.').

5. However, on 30.11.2018, Manoj Kumar Mishra was appointed as

Interim Resolution Professional (IRP), and later on confirmed as the RP on

05.02.2019.

6. After taking over the control of the Corporate Debtor, the RP found

that the Slump Sale Agreement was preferential and undervalued

transaction under Sections 43 and 49 of the IBC.

7. Respondent No. 4 also filed MA No. 2265/2019 to support the case of

the RP, who had filed MA No. 1061/2019, in which three prayers were

made, namely, Order in terms of Section 48 requiring property transferred

as part of transaction be vested back into the Corporate Debtor, its earlier

transfer to various Parties in terms of Slump Sale Agreement be restored to

the Corporate Debtor and Corporate Debtor be instructed to cooperate in

providing information on daily basis.

8. The case of the Appellant is that it was in possession since

08.03.2016. It entered into a Slump Sale Agreement on 05.05.2018 with the

Corporate Debtor for a consideration of Rs. 52,50,000,000/- out of which it

paid Rs. 9,63,75,895/- to the SBI on behalf of Corporate Debtor and

adjusted Rs. 42,86,24,105/-, the amount given in advance, as sale

consideration. Therefore, it is alleged that it had become the owner of the

property.

9. The case of the Respondent is that there is no detail of the loan of Rs.

42,86,24,105/- because no document in this respect has been placed on

record, therefore, the transaction seems to be dubious and preferential once, Comp. App. (AT) (Ins.) No. 2300 of 2024 & I.A. No. 8653 of 2024 3 of 6 carried out to defraud the Creditors. The Learned Tribunal has observed

that the whole case of the Appellant is based upon the fact that there was

an unsecured loan amount of Rs. 42.86 Crores, advanced by the Appellant

to the Corporate Debtor, but no evidence or document establishing the

existence of the unsecured loan has been placed on record. The findings in

this regard are reproduced in Paragraphs 25 & 26 of the Impugned Order,

which are reproduced as under:

"25. We have thoughtfully considered the aforesaid contentions raised by the Counsel for the Respondent but have found the same to be untenable. Firstly, it sounds quite strange that if the value of the property in question is just about Rs. 12 crores, as assessed by the State Bank of India at the time of sanctioning the OTS scheme, why on earth the Respondent would buy it for a sum of Rs. 52.50 crores. It also appears to be quite queer as to how the Respondent has been privy to the forensic audit report, which is a confidential document. Even otherwise, even if the forensic auditor opined that the transaction was neither preferential nor undervalued, such an opinion cannot be said to be binding upon the RP/Liquidator nor the same can be said to be binding on this Authority. Considering the fact that the property in question was hurriedly sold off for a paltry sum of Rs. 9 crores, knowing fully well that a petition u/s 9 was pending, the transaction in question cannot be said to be anything but preferential and undervalued transaction having overtones of wrongful trading in terms of Section 66(2) of the Code.

26. We have also gone through the Slump Sale Agreement dated 05.05.2018. It is pertinent to point out that in pursuance of this agreement, no registered sale/conveyance deed has been executed so far and as per Clause 12.2 of the aforesaid agreement, the agreement would stand automatically terminated if a liquidator is appointed over any of the undertaking or assets of the either party before the closing date i.e. 31-12-2018. As per this clause, with the passing of the admission order against the Corporate Debtor on 30.11.2018, which was before the closing date, technically speaking the Slump Sale Agreement in Comp. App. (AT) (Ins.) No. 2300 of 2024 & I.A. No. 8653 of 2024

4 of 6 question came to an end and no benefit under the said agreement can be claimed by the Respondent. Even otherwise, as stated above, and for the sake of repetition, it is reiterated that the sale is a bogus one and a sham transaction entered into to defeat the valuable rights of the creditors of the Corporate Debtor."

10. Although Counsel for the Appellant has vehemently argued that the

amount of Rs. 42.86 Crores was an unsecured loan towards the Corporate

Debtor, but there is no documentary evidence that the Corporate Debtor has

availed such a huge loan from the Appellant. The Tribunal has also

categorically observed that there was no registered Sale/Conveyance Deed,

executed between the Parties of the Immovable Property, which as per

Section 17 of the Registration Act is a mandatory condition as has been held

by the Hon'ble Supreme Court in the matter of `Suraj Lamp & Industries

Pvt. Ltd.' Vs. `State of Haryana & Anr.', in Special Leave Petition (C)

No.13917 OF 2009, in which it has been held that an Immovable Property

cannot be transferred merely on the Agreement of Sale, rather there has to

be registered Sale Deed in that regard.

11. Clause 7 of the Slump Sale Agreement dated 05.05.2018, categorically

lays down the condition for executing the Sale Deed. Clause 7.3 & Clause

7.11 are reproduced as hereunder:

"7.3 The Seller shall execute a conveyance deed with the Purchaser for the transfer of entire land admeasuring 5.85 acres situated at Gut No. 279, 286, 287(P) Dakivali Village, Bhiwandi Wada Road, Near Tansa river, Taluka-Wada, District Palghar 421312 and Gut No. 253, Village: Chikale Post Office-Kone, Taluka-Wada, District-Palghar-421312 described in Annexure-A in favour of the Purchaser without any additional consideration.

7.11 The Purchaser and the Seller shall appear before the Registrar/ Sub-Registrar of Assurance and Comp. App. (AT) (Ins.) No. 2300 of 2024 & I.A. No. 8653 of 2024 5 of 6 present the conveyance deed and sub-lease deed of the Land for registration and do all acts and deeds incidental thereto;"

12. We have also specifically asked the Counsel appearing on behalf of the

Appellant to refer to the Agreement between the Parties on the basis of

which the said loan of Rs. 42.86 Crores has been obtained by the Corporate

Debtor to which he could only answer that CA Certificate has been attached

in this regard which cannot be taken into consideration to hold that the

Corporate Debtor has been given such a huge loan by the Appellant and the

said advance has been adjusted as a sale consideration on the basis of a

mere Agreement to sell and without a Sale Deed.

Thus, in view of the aforesaid facts and circumstances, we do not find

any error in the Impugned Order and thus the present Appeal is hereby

dismissed though without any Order as to costs.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Naresh Salecha] Member (Technical)

[Indevar Pandey] Member (Technical) himanshu/rr

Comp. App. (AT) (Ins.) No. 2300 of 2024 & I.A. No. 8653 of 2024 6 of 6