Dnyaneshwar Chaudhari & Anr vs Mr Gajesh Labhchand Jain & Ors

IN THE MATTER OF: Bela Gujrati & Ors. ...Appellants

Versus

Gajesh Labhchand Jain & Anr. ...Respondents Present: For Appellants: Mr. Sumesh Dhawan, Ms. Vatsala Kak, Ms. Geetika Sharma and Mr. Sujal Gupta, Advocates. For Respondents: Ms. Khushboo Shah Rajani and Mr. Ayush J Rajani, Advocates for R-1.

With

Company Appeal (AT) (Insolvency) No. 67 of 2022

IN THE MATTER OF: Dyaneshwar Chaudhari & Anr. ...Appellants

Versus

Gajesh Labhchand Jain & Ors. ...Respondents Present: For Appellants: Mr. Aman Varma, Mr. Kunal Tandon and Ms. Richa Sandilya, Advocates. For Respondents: Ms. Khushboo Shah Rajani and Mr. Ayush J Rajani, Advocates for R-1 Mr. Sumesh Dhawan, Ms. Vatsala Kak and Ms. Geetika Sharma, Advocates for R-2 to 5. Mr. Gaurav Shrawat and Ms. Bhavika Thakkar, Advocates for Intervenor.

ORDER

(Virtual Mode)

08.03.2022: Both these Appeals have been filed against the same

judgment of the Adjudicating Authority (National Company Law Tribunal)

Mumbai Bench, Court No. V dated 17.11.2021 passed in I.A. No. 107/2021

which was filed by the Resolution Professional. By the order dated

Cont'd..../ -2-

17.11.2021, the Adjudicating Authority while disposing I.A. No. 107/2021

following directions have been passed in Para 37:-

"37. In view of the above the Bench directs the following:

a. Removal of R3 to R7 form CoC and also as financial Creditor/ Home-Buyer, as there is no debt own to them by the Corporate Debtor company and purported infusion of funds by each of these Respondent were retuned back to them through their related parties (relatives) on the same day of the next day by Respondent Number 1 and 2 who are suspended directors of the Corporate Debtor company.

b. These transactions of purported creditors are vitiated by fraud, therefore all these transactions are declared as null and void.

c. The Resolution Professional (RP) to reconstitute the CoC after cancelling the entire voting rights of R3 to R7 in view of the fraud committed by these Respondents with an intention to defraud the Corporate Debtor company"

2. We may first notice the facts in the Company Appeal (AT) (Ins.) No. 26

of 2022. This Appeal has been filed by four Appellants who are arrayed as

Respondents in I.A. No. 107/2021. The Appellants' case in the Appeal is that

all Appellants are Homebuyers and they have paid different amounts to the

Corporate Debtor. Appellant No. 1 has submitted claim for amount of

Rs.30,55,000/- in Form CA while Appellant No. 2 has filed claim of

Company Appeal (AT) (Insolvency) No. 26 of 2022 & 67 of 2022 -3-

Rs.15,00,000/-, Appellant No. 4 has filed claim of Rs.31,55,000/- and

Appellant No. 4 has filed claim for Rs.31,55,000/-. The aforesaid all claims of

the Appellants were admitted by the Resolution Professional. Committee of

Creditors (CoC) was formed in which Appellants were assigned different voting

rights in value of the amount admitted. I.A. No. 107/2021 was filed by the

Resolution Professional praying that the Appellant alongwith one other should

be removed from the CoC and entire voting rights of the Appellants be

cancelled. The Appellants' case is that in I.A. No. 107/2021 notices were

issued and they had filed their replies on 29.05.2021, 31.05.2021 and

01.06.2021. It is submitted that written submissions were also filed by the

Appellants' on 19.07.2021 after the order was reserved on 16.07.2021. The

Adjudicating Authority by the impugned order has directed for removal of

Respondent Nos. 3 to 7 from the CoC and also as Financial Creditor - Home

Buyer. The reason given by the Adjudicating Authority in the impugned order

is with regard to an amount of Rs.10 Lakhs which was paid by the Appellant,

that there is circuitous transaction by which the amount was returned back

to the relatives of the Appellant.

3. Learned counsel for the Appellant challenging the order impugned

submitted that the findings recorded by the Adjudicating Authority are

without considering the reply filed by the Appellants and the Adjudicating

Authority has committed error in observing that no reply has been filed by

these Appellants. It is submitted that without there being reply, the

Adjudicating Authority committed error in returning findings against the

Appellants. Learned counsel for the Appellants further submitted that the

Company Appeal (AT) (Insolvency) No. 26 of 2022 & 67 of 2022 -4-

amount which was admitted by the Resolution Professional was much more

than Rs.10 Lakhs as noted above and on the alleged ground of circuitous

transaction of Rs.10 Lakh they should not have been removed from the CoC.

4. Learned counsel for the Appellants in Company Appeal (AT) (Ins.) No. 67

of 2022 also submits that he was also one of the Respondent in the Application

filed by the Resolution Professional where serious allegations have been made

that they have rooted back money to the relatives of Respondent no. 3 to 7

which amounts to Rs.70 lakhs. Further, it is submitted that they have filed

their reply on 07.05.2021 and also filed written submission on 19.07.2021.

5. Learned counsel for the Resolution Professional refuting the

submissions made by counsel for the Appellants submits that reply in so far

as Appellants in Company Appeal (AT)(Ins) No. 26 of 2022 is concerned a copy

of the written submission and an unsigned copy of reply was served to the

Resolution Professional. He, however, does not dispute that the claim of the

Appellants was admitted, submits that the Adjudicating Authority passed

order on the basis of circuitous transaction of Rs.10 Lakhs. With regard to

Company Appeal (AT)(Ins) No. 67 of 2022, learned counsel for Resolution

Professional submits that ex-directors have no locus to challenge the order

impugned and the Company Appeal (AT)(Ins) No. 67 of 2022 which deserves

to be dismissed having lack of locus.

6. We have considered submissions of learned counsel for the parties and

perused the record.

7. From perusal of the order passed by the Adjudicating Authority, it is

clear that Adjudicating Authority has made observations against the

Company Appeal (AT) (Insolvency) No. 26 of 2022 & 67 of 2022 -5-

Appellants and one of the premise on basis of which the order has passed

recording finding against the Respondents (Appellants herein) that they have

not filed any reply. In para 35 of the judgment following has been observed:

"35. The Bench also notes that from amongst these

alleged home buyers/ Respondents only R7 (Meena

Gokhle) has submitted a reply to this fraudulent

application. The Bench note that the contention of R7

are feeble and baseless. R7 mentions that the

allegations against them is devoid of any corroborative

evidence and that no material of conclusive evidence

has been put up against the aforesaid mentioned

allegation"

8. We further notice that in para 22 of the judgment the Adjudicating

Authority proceeded on the premise that entire money invested by the

Appellants - home buyers have been rooted back to the relatives of Respondent

No. 3 to 7. The discussion is only with regard to alleged Rs.10 Lakhs which

finding has been recorded without considering the reply. The Resolution

Professional who was also before the Adjudicating Authority, it was his duty

to point out that Rs.10 lakhs is not the total amount paid by the Appellants

and claim admitted by the Resolution Professional was also larger amount as

claimed by the Appellants. The Adjudicating Authority from the observations

in the impugned order noted in Para 22 indicate that Adjudicating Authority

was under impression that the entire money invested by the Home Buyers

have been rooted back to the relatives of Respondent No. 3 to 7, which is

Company Appeal (AT) (Insolvency) No. 26 of 2022 & 67 of 2022 -6-

obviously not the position and the same ought to have been cleared by the

Resolution Professional before the Adjudicating Authority.

9. In so far as Company Appeal (AT) (Ins.) No. 67 of 2022 is concerned, we

also do not agree with the submission of the Resolution Professional that Ex-

Directors have no locus to file the Appeal. In the Application I.A. No. 107/2021

which was filed by the Resolution Professional it was clearly sought that

Respondent No. 1 and 2, who are the Ex-Directors, be directed to contribute

Rs.70 Lakhs back to the Corporate Debtor. When order was sought for

contribution of Rs.70 Lakhs form the Ex-Directors and the Adjudicating

Authority in the impugned order has made observations against the

Suspended Directors also, we see no reason to accept the submission that Ex-

Directors have no locus to challenge the order. Observation that transactions

are vitiated have serious consequences which can very well be questioned by

the aggrieved person.

10. We make it clear that we have not entered into the merits of the

allegations made or claim made in the application of the Resolution

Professional or Reply which was submitted by the Appellants before the

Adjudicating Authority. At this stage, we are of the view that the Adjudicating

Authority should reconsider the application after considering the reply

submitted by the Appellants and after hearing them afresh. The order passed

by the Adjudicating Authority which is also passed on the ground that no

replies have been submitted by the Appellants deserves to be set aside and is

hereby set aside. The matter is remitted to the Adjudicating Authority to pass

fresh order in I.A. No. 107/2021 in CP (IB) 2995/MB/2019 after considering

Company Appeal (AT) (Insolvency) No. 26 of 2022 & 67 of 2022 -7-

the replies filed by the Appellants as well as after giving fresh opportunity of

hearing to both the parties. We make it clear that we may not understood to

be expressing opinion on the merits of the matter and it is for the Adjudicating

Authority to take appropriate decision on the application. Both Appeals are

allowed accordingly.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical) Archana/nn

Company Appeal (AT) (Insolvency) No. 26 of 2022 & 67 of 2022