Ds Kulkarni & Associates vs Mr. Manoj Kumar Agarwal

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No.923 of 2023 (Arising out of Order dated 31.03.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-I in IA No.721/MB/C-I/2023 in CP (IB) No.1633/MB/C-I/2019)

IN THE MATTER OF: D S Kulkarni & Associates, DSK House, 1187/60, J M Road, Shivajinagar Pune 411005 ... Appellant

Vs

Manoj Kumar Aggarwal Resolution Professional of D S Kulkarni Developers Ltd. 1187/90, J M Road, Shivajinagar Pune 411005 AND Office No.4 1st Floor, Pride Plaza, B/H Ambedkar Statute, Pimpri Chowk, Pimpri, Pune-411018. ... Respondent

Present:

For Appellant: Mr. Sandeep Bajaj, Ms. Aakanksha Nehra, Mr. Naman Tandon and Adya Singh, Advocates.

For Respondents: Mr. Abhijeet Sinha, Mr. Varun Kalra and Mr. Saikat Sarkar, Advocate for R-1

Mr. Arvind Nayar, Sr. Advocate with Mr. Puneet Singh Bindra, Mr. Akshay Sharma, Akshay Doctor, Ms. Simran Jeet, Mr. Rishabh Gupta, Mr. Sameer Sethi, Advocates for SRA.

With Company Appeal (AT) (Insolvency) No.924 of 2023 (Arising out of Order dated 31.03.2023 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench-I in IA No.722/MB/C-I/2023 in CP (IB) No.1633/MB/C-I/2019)

IN THE MATTER OF: D S Kulkarni & Company, DSK House, 1187/60, J M Road, Shivajinagar Pune 411005 ... Appellant

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 1 Vs

Manoj Kumar Aggarwal Resolution Professional of D S Kulkarni Developers Ltd. 1187/90, J M Road, Shivajinagar Pune 411005 AND Office No.4 1st Floor, Pride Plaza, B/H Ambedkar Statute, Pimpri Chowk, Pimpri, Pune-411018. ... Respondent

Present:

For Appellant: Mr. Sandeep Bajaj, Ms. Aakanksha Nehra, Mr. Naman Tandon and Adya Singh, Advocates.

For Respondents: Mr. Abhijeet Sinha, Mr. Varun Kalra and Mr. Saikat Sarkar, Advocate for R-1

Mr. Puneet Singh Bindra, Mr. Akshay Sharma, Akshay Doctor, Ms. Simran Jeet, Mr. Rishabh Gupta, Mr. Sameer Sethi, Advocates for SRA.

JUDGMENT

ASHOK BHUSHAN, J.

These two Appeals have been filed challenging order dated

31.03.2023 passed by National Company Law Tribunal, Mumbai Bench-I,

by which IA Nos.721 of 2023 and IA No.722 of 2023 filed by the Appellant(s)

seeking a direction to admit their claim have been rejected.

2. Brief facts giving rise to these two Appeal(s) are:

(i) By an order dated 26.09.2019 passed on an Application filed

under Section 7 of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as the "Code") by Bank of Maharashtra,

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 2 Corporate Insolvency Resolution Process ("CIRP") commenced

against the Corporate Debtor - D S Kulkarni Developers Ltd.

The Respondent invited claims from the creditors on or before

09.10.2019.

(ii) A Claim in Form CA (Submission of claim by Financial

Creditors in a Class) for an amount of Rs.166,74,48,579/- and

another Claim in Form-F for an amount of Rs.59,000/- was

filed by D.S. Kulkarni & Associates.

(iii) The Resolution Professional ("RP") vide his email dated

14.10.2019 asked the Appellant D.S. Kulkarni & Associates to

provide for documents to substantiate their claim. The RP sent

reminder dated 13.11.2019. On 03.05.2021, the authorised

representative of the Appellant again resubmitted the same

Claim Forms on behalf of D.S. Kulkarni & Associates. On

28.05.2021, the RP again asked the D.S. Kulkarni &

Associates to provide relevant supporting documents to

substantiate their Claim. No documents having been provided

the Claim was rejected.

(iv) The Claim on behalf of D.S. Kulkarni & Company (Appellant in

Company Appeal (AT) (Ins.) No.924 of 2023) was filed on

07.10.2019 in Form-CA for an amount of Rs.464,19,99,032/-

and other Claim in Form-F was filed for an amount of

Rs.27,78,80,000/-.

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 3

(v) The RP vide email dated 14.10.2019 asked the D.S. Kulkarni

& Company to submit documents to substantiate their claim.

On 03.03.2021 D.S. Kulkarni & Company again submitted

claim, to which the RP vide email dated 28.05.2021 again

asked to provide all relevant and supporting documents in

respect of the claim.

(vi) The Resolution Plan submitted by the Resolution Applicant

was approved by the Committee of Creditors ("CoC") on

13.08.2021 and on 24.08.2021, the RP filed IA No.1950 of

2021 for approval of the Resolution Plan. On 22.02.2023,

Plan approval Application was heard and orders were reserved.

(vii) In February 2023, IA No.721 of 2023 was filed by D.S.

Kulkarni & Associates seeking a direction to admit their Claim.

Similarly, IA No.722 of 2023 was filed by D.S. Kulkarni &

Company seeking a direction to admit their claim. In IA Nos.

721 and 722 of 2023, the RP filed its reply. The RP in its reply

affidavit stated that no documents having been submitted by

the Applicant(s) to substantiate their claim, the claims were

rejected. It is submitted that the Resolution Plan was

approved on 13.08.2021 and the Applications being IA

Nos.721 and 722 of 2023 have been filed in February 2023,

which is nothing but an attempt to cause hinderance in CIRP

of the Corporate Debtor. The RP pleaded that Applicant(s), i.e.,

D.S. Kulkarni & Associates and D.S. Kulkarni & Company are

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 4 'related party' to the Corporate Debtor and there have been

various fraudulent, undervalued, preferential and exorbitant

transactions undertaken by the Corporate Debtor for which an

Application-IA No.2022 of 2021 has been filed for avoiding the

transaction. It is stated that various proceedings were

initiated against the Corporate Debtor and its 'related party' by

different Authorities. Due to the actions of the Corporate

Debtor, the Directors were also lodged in Jail.

(viii) The Adjudicating Authority after hearing the parties, by the

impugned order dated 31.03.2023 rejected IA No.721 of 2023.

The Adjudicating Authority held that CIRP order was passed

on 26.09.2019, the Resolution Plan was duly approved by the

CoC on 13.08.2021 and the Application has been filed with

delay. The Adjudicating Authority held that the RP did not

commit any illegality or irregularity in rejecting the Claim of

the Appellant. IA No.722 of 2023 was also rejected by the

Adjudicating Authority, by making similar observations.

(ix) These two Appeal(s) have been filed challenging the order dated

31.03.2023 passed respectively in IA Nos.721 and 722 of 2023.

3. We have heard Shri Sandeep Bajaj, learned Counsel appearing for

the Appellant(s); Shri Abhijeet Sinha, learned Counsel appearing for the

RP; and Shri Arvind Nayar, learned Senior Advocate and Shri Puneet Singh

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 5 Bindra, learned Counsel appearing for Successful Resolution Applicant

("SRA").

4. The learned Counsel for the Appellant challenging the order submits

that Claims were filed by the Appellant on 09.10.2019, i.e., within the time

as published by the RP. It is submitted that along with the Claim Form,

the Appellant has also filed respective Memorandum of Understanding

("MoU") as well as Ledger extracts, which prove that amounts were

advanced by the Appellant to Corporate Debtor. Ms. Hemanti Kulkarani,

Authorised representative with other Directors of D.S. Kulkarni Group

were in Jail till they got the bail on 18.11.2022, hence, the relevant

documents could not be filed. It is submitted that additional affidavit was

filed by the Appellant(s) before the Adjudicating Authority, where Ledger

statements and Bank statements were filed, proving the advance made by

the Appellant to the Corporate Debtor. It is submitted that on the basis of

MoU and Ledger extract, which were annexed with the Claim Form, the RP

ought to have admitted the claims. It is submitted that the Adjudicating

Authority committed error in rejecting Application filed by the Appellant(s)

being IA Nos.721 and 722 of 2023, although sufficient materials were filed

to indicate that amounts were advanced to the Corporate Debtor by

Appellant(s), which were reflected in the Ledger extracts as well as in the

Bank statements. In the Appeal, the learned Counsel has also referred to

IA No.5941of 2023 filed in Company Appeal (AT) (Ins.) No.923 of 2023

where the balance sheet of the Corporate Debtor for the years 2013-14,

2014-15, 2015-16 and 2016-17 have been brought on record, which also

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 6 reflect the advance made by Appellant to the Corporate Debtor. Similarly

in Company Appeal (AT) (Ins.) No.924 of 2023, balance sheet for the same

period have been filed reflecting the amount advanced by the Appellant.

The learned Counsel submits that in view of the above materials, the claim

of the Appellant(s) deserved to be admitted.

5. The learned Counsel for the RP, refuting the submissions of learned

Counsel for the Appellant(s) submits that claims were filed before the RP

on 09.10.2019. It was incumbent upon the Appellant(s) to submit relevant

documents as requested by the RP vide his email dated 14.10.2019 and

reminder on 13.11.2019. Inspite of the RP demanding the supporting

documents from the Appellant(s) to substantiate their claim, no documents

were submitted, hence, the RP has no option except to reject the claim. It

is submitted that MoU and Ledger extract, which were filed along with the

claim Form in no manner prove the financial debt as was claimed by the

Appellant(s). It is submitted that Resolution Plan was approved by the CoC

on 13.08.2021 and the fact that Application(s) - IA Nos.721 and 722 of

2023 were filed in February 2023 indicate that the Adjudicating Authority

has been approached by the Appellant(s) with inordinate delay, i.e., after

more than one and a half year from the approval of the Plan by the CoC. It

is submitted that Plan having already been approved by the CoC, the

Application(s) submitted by the Appellant(s) were rightly been rejected by

the Adjudicating Authority. It is submitted that both the Appellant(s) are

'related party' to the Corporate Debtor and various fraudulent, undervalued

and frivolous transactions were done by them with regard to which RP has

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 7 also filed avoidance application in the year 2021, which are pending

consideration. The Corporate Debtor and its related group entities,

indulged in various fraudulent transactions with regard to which

Promoters are facing several proceedings. It is submitted that documents

which were submitted along with claim Form were insufficient to accept

the claim and RP has rightly rejected the claim of the Appellant(s).

6. The learned Counsel for SRA also adopted the submission of learned

Counsel for RP and submits that Plan having been approved by the CoC

and subsequently by the Adjudicating Authority in June 2023, and the

order approving the Resolution Plan dated 23.06.2023 has not been

challenged by the Appellant, both the Appeal(s) deserve to be dismissed.

No relief can be granted to the Appellant(s) and Appeal(s) can be dismissed

on this ground alone.

7. We have considered the submissions of learned Counsel for the

parties and have perused the record.

8. We need to notice the Form-CA dated 07.10.2019, which was filed by

the Appellant - D.S. Kulkarni & Associates as well as D.S. Kulkarni &

Company before the RP. The Item Nos.4 and 5 in the Claim Form are as

follows:

4. Total amount of claim 1) Outstanding amt for advances (in Rs.) against tenements, rent etc. Rs.141,30,92,016/-

2) Interest : Rs.25,43,56,563 Total : Rs.166,74,48,579/-

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 8

5. Details of documents 1. Ledger Extract by reference to which

2. MOU Copy the debt can be substantiated

9. Only two documents were filed along with the Claim Form, i.e.,

Ledger extract and MoU. The RP vide his emails and reminders asked the

Appellant to submit documents to substantiate their claim. On

03.11.2019, the RP sent the following email to the Appellant:

"Dear Sir, We have not yet received any supporting documents from your side to substantiate your claims. Please send the same.

On Mon, Oct 14, 2019 at 07:40 PM CIRP DSK Developers Ltd. ip.dskdl@gmail.com wrote:

Please provide all the documents to support your claims made. Documents attached are insufficient to substantiate the claims made."

10. No response was given to the emails by the Appellant. On

03.10.2021, claim was again submitted on behalf of the Appellant, which

was replied on 28.05.2021 by the RP to the following effect:

"Dear Sir, As already communicated to your earlier too, request you to please provide all relevant supporting documents to substantiate the claims submitted. You have just submitted various claim forms and tally ledger statements of either the CD or the claimants. However various other documents are required to be submitted to properly substantiate your claims. We cannot admit your

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 9 claims for lack of proper and complete documents to substantiate the claims.

Thanks & Regards, For, M/s. D S Kulkarni Developers Limited Manoj Kumar Agarwal Resolution Professional"

11. Inspite of RP requesting the Appellant(s) to file documents to

substantiate their claim, no reply was given to the RP and the claim

consequently was rejected by the RP.

12. We need to also consider as to whether on the basis of MoU and

Ledger extract, which were filed by the Appellant(s) before the RP, it can be

proved that there was any financial debt. The MoU dated 01.01.2011 has

been brought on record along with the Appeal as Annexure-A2. The MoU

entered between the Corporate Debtor and M/s D.S. Kulkarni & Associates

indicate that the Second Party, D.S. Kulkarni & Associates approached the

Corporate Debtor for purchasing or jointly develop the properties. The MoU

mentions the immovable properties, which is claimed to be owned by the

Corporate Debtor for which the Second Party is the Appellant. We need to

notice Clause 6 and Clause 11 of the MoU, which are as follows:

"6. The Party of the word part approached the Party of the First Part and informed that the Party Of The second Part is interested in purchasing and or jointly developing the properties and around Balewadi area in Pune under residential zone.

11. The parties after negotiations fixed the final consideration to Rs.1,11,00,00,000/- (One

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 10 Hundred and Eleven Cr. Only). It is further agreed that the said consideration shall be paid in the manner mentioned hereinafter. The parties further admit that in the event of parties choose to execute the joint venture, the said consideration amount shall be considered as share/ investment brought by the party of the Second Part. It is further agreed that the terms of joint venture shall be decided mutually. It is also agreed that, the interest paid as per clause 8 shall be adjusted against the share in joint venture profit of the party of the second part."

13. The MoU stated that the Appellant approached the Corporate Debtor

for purchasing and or jointly developing the properties. Further, Clause

11 indicates that parties may chose to execute the joint venture and the

said consideration amount shall be considered as share/ investment

brought by the party of the Second Part. The MoU, which is the basic

document submitted by the Appellant to prove financial debt, does not

indicate that transactions are covered by Section 5, sub-section (8) of the

Code. The consideration according to the MoU was paid either for

purchasing the property or for entering into joint venture, where the

consideration was to be treated as investment. Joint venture profit has

also been captured in Clause 11. The Ledger extract, which has been filed

also cannot make the transaction as financial debt.

14. We have looked into the aforesaid MoU and claim of Ledger extract

to satisfy ourselves as to whether RP was obliged to admit the claim as

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 11 financial debt on the basis of said documents. We are of the view that RP

has rightly communicated to the Appellant that documents submitted are

insufficient to accept their claim as financial debt and no error has been

committed.

15. Now, we also look into the MoU dated 13.04.2013, which is relied in

Company Appeal (AT) (Ins.) No.924 of 2023 by D.S. Kulkarni & Company.

In the aforesaid case, claim was also filed in Form-CA, i.e., Claim by

Financial Creditor. The Claim Form refers to MoU and the Ledger extract.

MoU has been filed as Annexure-A2. MoU was entered between the

Corporate Debtor and D.S. Kulkarni & Company. In Clauses D, E and F,

following have been stated:

"D. The party of the second Part had came to know that the Party of the First Part is developing and constructing large Township at Fursungi Ie. Property described in Schedule - I written hereunder, therefore Party of the Second Part was desirous to purchase various units/ commercial complex in proposed township to be developed by Party of the First Part. E. Thus, Party of the Second part approached to party of the First with intention to purchase proposed units in township at Fursungi, to be constructed in DSKDI. i.e. Party of the First Part.

F. The parties after negotiations agreed that, Party of the First Part will allot various Units to be constructed in the township Adm. About 5,00,000/- Sq. ft. built up rate of Rs.6,000/- per sq. ft. thus, the final consideration will be Rs.300,00,00,000/- (Rupees Three Hundred Crores only)."

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 12

16. The Claim Form mentions the Appellant as Financial Creditor. We

may refer to Section 5, sub-section (8), Explanation (i) and (ii), which was

inserted by Act No.26 of 2018 with regard to real estate allottees. The

Appellant cannot be treated as a real estate allottees on the basis of MoU,

as per the definition of Section 5 (8)(f) Explanation.

17. We have looked into the MoU only to satisfy ourselves whether RP

decision with regard to documents submitted by the Appellant were

insufficient to accept their Claim as Financial Creditor was correct or not

and we are satisfied that no error was committed by the RP in not accepting

the Claim of the Appellant(s) as Financial Creditor.

18. As noted above, the Resolution Plan of the Corporate Debtor was

approved by the CoC on 13.08.2021 and the Applications/ IA Nos.721 and

722 of 2023 were filed by the Appellant(s) in February 2023, i.e., more than

one and a half year after approval of the Resolution Plan. The Adjudicating

Authority has rightly taken the view that no good reasons have been

explained by the Appellant(s) in filing the Application(s) with great delay of

more than one and a half year. Resolution Plan having been approved by

the CoC on 13.08.2021, the Adjudicating Authority rightly rejected the

Application(s). The Adjudicating Authority has relied on the judgment of

this Tribunal in Company Appeal (AT) (Insolvency) No.1050 of 2020 in

the matter of Mukul Kumar Vs. M/s RPS Infrastructure Ltd., which

judgment has also been approved by the Hon'ble Supreme Court in M/s.

RPS Infrastructure Ltd. vs. Mukul Kumar. The mere fact that Application

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 13 for approval of Resolution Plan is pending for consideration by the

Adjudicating Authority does not entitle the Appellant(s) to file an

Application for acceptance of their Claim after more than one and a half

year of the approval of the Resolution Plan by the CoC.

19. As noted above, the Resolution Plan of the Corporate Debtor, which

was approved by the CoC on 13.08.2021 has now been approved by the

Adjudicating Authority by order dated 23.06.2023, as has been pleaded by

the Appellant in his additional affidavit. The Resolution Plan having been

approved, the order approving the Resolution Plan dated 23.06.2023 has

also been brought on record as Annexure A7 in IA No.5941 of 2023 filed by

the Appellant in Company Appeal (AT) (Ins.) No.923 of 2023. The

Resolution Plan has already been approved, which order has also not been

challenged by the Appellant. In any view of the matter, after considering

the facts and the sequence of event in the present Appeal(s), we are of the

view that Adjudicating Authority has rightly rejected IA Nos.721 and 722

of 2023, refusing to accept the prayer of the Appellant(s) to issue a direction

to admit their claim. The Appellant(s) failed to submit relevant documents

before the RP inspite of RP writing to the Appellant(s) to submit the

documents to substantiate their claim, no error was committed by the RP

in not admitting the claim.

20. Insofar as documents which have been brought on record by the

Appellant(s) before the Adjudicating Authority by filing additional affidavit,

suffice it to say that the basic documents relied by the Appellant(s) were

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 14 MoU and Ledger extract. The MoU, which is a basic document evidencing

the transaction does not qualify as a financial debt and the RP has rightly

taken the view that the documents filed, i.e. MoU and Ledger statement are

insufficient to accept the Claim as financial debt.

21. In view of the foregoing discussions and conclusions, we are of the

view that no grounds have been made out to interfere with the order dated

31.03.2023 passed by the Adjudicating Authority, rejecting IA Nos 721 and

722 of 2023. Both the Appeals are dismissed. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Mr. Arun Baroka] Member (Technical)

NEW DELHI

3rd January, 2024

Ashwani

Company Appeal (AT) (Insolvency) Nos.923 & 924 of 2023 15