Expert Realty Professionals ... vs Logix Infrastructure Private Limited

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH: NEW DELHI Company Appeal (AT) (Insolvency) No. 383 of 2025 [Arising out of the Order dated 06.02.2025, passed by the 'Adjudicating Authority' (National Company Law Tribunal, New Delhi Bench) in IB-237(ND)/2023]

IN THE MATTER OF: Expert Realty Professionals Private Limited Through Neeraj Gusain Pro. C-31, G/F, Natthu Singh Market, Masoodpur, New Delhi, Email: expertrealtyprofessional@gmail.com ...Appellant

Versus

1. Logix Infrastructure Private Limited Through RP Mr. Pawan Kumar Goyal 304, DR Chambers 12/56 DB Gupta Road Karol Bagh, Delhi Email: legal@logixinfrastructure.com ...Respondent No.1 2. Ankoor B Sarkar R/o I- 1907 Logix Blossom County, Sector 137, Noida, UP ...Respondent No.2 3. Varun Kumar Bala R/o M-1501 logix blossom county, Sector 137, Noida UP ...Respondent No.3 Present: For Appellant : Mr. Sunil Fennandes, Sr. Advocate with Mr. Ketan Madan and Ms. Muskan Surana, Advocates For Respondent : Mr. Gaurav Rana and Mr. Ajitesh Kumar, Advocates for R-2 & 3. Mr. Rishi Singhal, Mr. Pawan Kr. Goyal and Ms. Reena, Advocates for RP/R-1.

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)]

The present Appeal arises out of the order dated 06.02.2025 passed by

the Hon'ble National Company Law Tribunal, New Delhi Bench, in CP(IB) No.

237/2023.

Brief facts of the case

2. Respondent No. 1, Logix Infrastructure Pvt. Ltd., is engaged in real

estate development and launched a residential project, Blossom County, in

Sector 137, Noida. The project comprised 17 towers with 2,384 units,

originally scheduled for completion in 2013. However, construction remained

incomplete in several towers. On 20.10.2020, Respondent No. 1 entered into

an agreement with the Appellant, Expert Realty Professionals Pvt. Ltd., under

which a total built-up area of 1,37,918 sq. ft. was agreed to be sold under a

buy-back arrangement. Pursuant to this, the Appellant infused ₹15 crore

between October 2020 and February 2021 through banking channels. This

investment facilitated further construction activity at the project site.

Subsequently, a sum of ₹12,88,04,535/- became due and payable to the

Appellant, and the minutes dated 15.12.2021 recorded the parties' mutual

understanding regarding the same. Owing to non-payment of the said

amount, the Appellant filed a petition under Section 7 of the Insolvency and

Bankruptcy Code, 2016 before the Hon'ble NCLT, which was registered as

CP(IB) No. 237/2023.

3. During the pendency of the proceedings, an objection was raised by a

homebuyer association (Logix Blossom County Apartment Owners Association)

by filing an interlocutory application being IA No. P26 of 2023 alleging

collusion between the parties. However, this objection was rejected by the

Hon'ble NCLT vide order dated 04.07.2023 as being misconceived. After

hearing the parties and considering the materials on record, the Hon'ble NCLT

Company Appeal (AT)(Insolvency) No. 383 of 2025 2 of 30 admitted the petition under Section 7 on 14.07.2023 and appointed Mr.

Pawan Kumar Goel as the Interim Resolution Professional (IRP).

4. A constituent member of the Logix Blossom County Apartments Owners

Association filed an application titled Aniket Tyagi & Anr., being IA No. 4531

of 2023, under Section 65 of the Insolvency and Bankruptcy Code, seeking

dismissal of the CIRP on grounds similar to those previously raised in IA No.

P26 of 2023.

5. The Respondent No. 2 and 3 filed IA No. 6541/2023 dated 13.12.2023

under Section 65 of the IBC alleging that the Appellant/FC and the CD, M/s

Logix, are related parties under Section 5(24) and that the Section 7

proceedings were fraudulently initiated. The Impugned Order dated

06.02.2025 allowed the application, recalled the admission order dated

14.07.2023, and imposed a penalty of Rs. 55 lakhs, which has been stayed

by this Tribunal while issuing notice.

Submission of the Appellant

6. The application under Section 65 of the Insolvency and Bankruptcy

Code, 2016, was filed only on 13.12.2023, i.e., five months after the admission

of CIRP (14.07.2023) and eight months after the filing of the Section 7 petition

(06.04.2023), indicating a clear after thought.

7. Section 65 penalizes initiation of insolvency proceedings for fraudulent

or malicious purposes. In the present case, the Section 7 petition was filed on

the basis of a duly executed loan agreement dated 20.10.2020, with all

relevant details furnished in the application. The Section 65 application fails

to plead or prove any fraudulent or malicious intent. The Adjudicating Company Appeal (AT)(Insolvency) No. 383 of 2025 3 of 30 Authority had already applied its mind and admitted the Section 7 petition

after examining all relevant facts and documents. Reversing such a reasoned

order amounts to a review in the guise of a fresh determination, which is

impermissible.

8. The sole basis for allowing the Section 65 application is the finding that

Mr. Hemant Sharma and Mr. Neeraj Gusain are related parties under Section

5(24) of the Code due to their association in an LLP since July 2020. However,

this fact alone does not prove any fraudulent or malicious conduct. Merely

being a related party is not sufficient to attract Section 65. The IBC

disqualifies related parties from being part of the CoC (Section 21(2)) and from

submitting a resolution plan (Section 29A), but nowhere equates related party

status with fraud or malice. It is therefore submitted that the impugned order

proceeds on an erroneous interpretation of law, in the absence of any

substantive evidence or pleading under Section 65, and deserves to be set

aside.

Submissions of R2 and R3

9. That the sole purpose behind the filing of the fraudulent, malicious and

concocted insolvency application by the Appellant against the Corporate

Debtor was to evade the Corporate Debtor's obligations towards the Noida

Authority, liabilities towards genuine homebuyers who have been granted

compensation/refund of their investment as per UP RERA and Consumer

Forum and derail in the registration process of the apartments allotted to the

genuine homebuyers. All the units of the project of the Corporate Debtor were

sold to all the allottees and the payment towards the same had already been

Company Appeal (AT)(Insolvency) No. 383 of 2025 4 of 30 made to the Corporate Debtor, thereby confirming that the Corporate Debtor

had recovered all the funds as planned against the said project. However, the

deliberate non-payment of statutory dues by the Corporate Debtor and the

same leading to non-registration of units by the Noida Authority in favour of

the genuine homebuyers, duly reflects the misappropriation of funds done by

the promoters of the Corporate Debtor. The insolvency application was

preferred solely to cover up such misappropriation.

10. From the bare perusal of the response filed by the Corporate Debtor to

the Section 7 Application of the Appellant, it is evident that the prompt

response of the Corporate Debtor in admitting to the said liability of the

Appellant reflects the malicious and fraudulent approach adopted by the

parties to release the Corporate Debtor of its obligations to other creditors and

allottees.

11. One Mr. Hemant Sharma i.e. Director of the Corporate Debtor has been

holding the position of Additional Director in the Appellant Company from

12.05.2020 to 05.09.2020. It is submitted that soon after leaving the

Appellant Company, Mr. Hemant Sharma was appointed as the Director of

the Corporate Debtor. One Mr. Neeraj Gusain was also appointed as Director

in the Appellant Company from 30.09.2020 and is still associated with the

Appellant Company. The conjoint understanding of the appointments of the

aforementioned individuals with the MoU dated 20.10.2020 executed between

Appellant and Corporate Debtor (which was signed by Mr. Hemant for

Corporate Debtor and Mr. Neeraj for Appellant) reflects that the alleged loan

transaction was pre-planned by the parties. Solely to avoid any related party

Company Appeal (AT)(Insolvency) No. 383 of 2025 5 of 30 transaction Mr. Hemant Sharma had resigned a month prior to the alleged

transaction and immediately joined the Corporate Debtor.

12. The nexus between Mr. Hemant and Mr. Neeraj can also be seen as both

were designated partners of a common entity namely New Greens Landkart

LLP.

13. The relationship between the parties must be examined at all three

critical stages under the Insolvency and Bankruptcy Code, 2016 (the

"Code")--namely, the existence of a debt, the debt being due, and the

occurrence of default. If the applicant is found to be a related party at any of

these stages, it casts doubt on the legitimacy of the insolvency proceedings,

especially where such facts are not disclosed to the Adjudicating Authority.

14. In the present case, it is submitted that the Financial Creditor (FC) and

the Corporate Debtor (CD) were related parties at the time of execution of the

MoU and other related documents. Recent judicial pronouncements,

including those affirmed by the Hon'ble Supreme Court, hold that any attempt

to sever such a relationship solely to circumvent the provisions of the Code is

impermissible.

15. It was argued that the non-disclosure of the related party status was

deliberate and formed part of a larger scheme to misuse the CIRP process.

The Adjudicating Authority was, therefore, justified in piercing the corporate

veil to reveal the real intent behind the initiation of proceedings, which was

found to be collusive and aimed at defeating the rights of other creditors.

Company Appeal (AT)(Insolvency) No. 383 of 2025 6 of 30

16. The Respondent submits that key individuals the FC and CD, being

partners in an LLP, remained connected throughout, and actively participated

in the Committee of Creditors (CoC) despite being ineligible, holding a

significant voting share of 21%.

17. Adjudicating Authority, while lifting the Corporate Veil of the Corporate

Debtor for unearthing such fraudulent and malicious transaction, took note

of the fact that neither the MoU dated 20.10.2020 nor the alleged minutes

dated 15.12.2021 wherein the Corporate Debtor has undertaken to pay the

amount to Appellant has been executed on stamp paper thereby raising the

question of its validity. Appellant failed to show any document which

substantiated the execution of the said documents on their respective dates.

Accordingly, the Adjudicating Authority has rightly allowed the application of

the Answering Respondents under Section 65 of the Code and rejected the

insolvency commencement order dated 14.07.2023, which was initiated

fraudulently and maliciously with ulterior motives.

18. Adjudicating Authority has rightly considered the evidence relating to

the fraud and connivance of the Appellant and Corporate Debtor in seeking

the benefit of insolvency and moratorium and debarring the genuine creditors

of their legitimate rights. Corporate Debtor had deliberately withheld from

conducting its duties even after receiving complete funds against, the units

allotted in its housing project.

19. To evade the threshold criteria and to have a distinct identity in the

CIRP of the Corporate Debtor, the Appellant has concocted and portrayed the

Company Appeal (AT)(Insolvency) No. 383 of 2025 7 of 30 said transaction as a financial debt. It is submitted that the Appellant was

completely aware that it would not have voting percentage in CoC if it becomes

homebuyer in class, the alleged transaction was maliciously and fraudulently

portrayed as financial debt before the Adjudicating Authority.

20. The purpose and intent behind the enactment of Section 65 of the Code

by the legislature is evidently to protect and preserve the interest of the

legitimate creditors of the Corporate Debtor. Section 65 of the Code entrusts

a duty upon the Ld. Adjudicating Authority to deliberate on the actions

undertaken and the intent behind the filing of the insolvency petition by the

Applicant therein.

21. Appellant is also challenging the timing of passing the said order under

Section 65 of the Code i.e. delay of alleged 140 days from the date of reserving

orders in IA No.6541 of 2023 and the CIRP of Corporate Debtor was running

at full throttle during the said period. But the provisions of Section 65 of the

Code explicitly empower the Adjudicating Authority to set aside the admission

order if it is proved and established through documents that the CIRP against

the Corporate Debtor is initiated in a fraudulent and malicious manner and

with ulterior motives.

22. In light of the above, the Respondent No. 2 & 3 pray that the appeal be

dismissed with exemplary costs, being a clear abuse of the process intended

to mislead the Tribunal and waste its valuable time.

Appraisal

23. Heard the counsels of both sides and also perused the material placed

on record.

Company Appeal (AT)(Insolvency) No. 383 of 2025 8 of 30

24. We note that this Tribunal had on 05.03.2025 ordered as follows:

"Issue notice. Learned counsel for the Resolution Professional is present and accepts notice. Learned counsel for the Respondent No.2 and 3 also accept notice. No notice needs to be issued. Let Reply be filed by the Respondents within two weeks. Rejoinder be filed within two weeks thereafter. List this Appeal on 17.04.2025 for admission/disposal. In the meantime, penalty of Rs.55 Lakhs imposed on the Appellant shall remain stayed. In the meantime, no third party rights shall be created in the assets of the Corporate Debtor."

25. Main issue before us is whether NCLT correctly identified financial debt

to be fraudulent and malicious and misjudged or not while observing collusion

and whether order for recall of the Section 7 proceedings is maintainable or

not.

26. We first look into as to how and in what circumstances the section 7

proceedings in the present case was initiated and admitted and whether they

were initiated fraudulently or maliciously.

27. The Appellant herein - M/s Expert Realty - is the original Section 7

Applicant before the Adjudicating Authority, who filed CP (IB) No. 237/2023

before the NCLT, New Delhi Bench-III, which was admitted vide order dated

14.07.2023. Subsequently, an IA No. 6541/2023 dated 13.12.2023 was filed

u/s Section 65 of the IBC by R2 & R3 herein claiming that the Appellant/ FC-

Expert Realty herein and the CD-Logix are related parties u/s 5(24) and that

the Section 7 Application so filed and allowed, was a fraudulent initiation of

proceedings. The Impugned Order allows the said application and recalls

Company Appeal (AT)(Insolvency) No. 383 of 2025 9 of 30 admission order dated 14.07.2023 by virtue of the "Impugned Order" vide

order dated 06.02.2025.

28. Before proceeding further, it will be instructive to note the relevant

provisions relating to Section 65 which are extracted as below:

"Section 65. Fraudulent or malicious initiation of proceedings.

(1) If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.

(2) If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees but may extend to one crore rupees.

(3) If any person initiates the pre-packaged insolvency resolution process-

(a) fraudulently or with malicious intent for any purpose other than for the resolution of insolvency; or

(b) with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees."

29. We note that Section 65 of the Insolvency and Bankruptcy Code, 2016,

provides for penalties in cases where proceedings under the Code--such as

those under Section 7 or Section 9--are initiated for a "fraudulent" or

"malicious" purpose. In the present case, the Section 7 application was filed

on the basis of a loan agreement dated 20.10.2020, and all material

particulars relating to the financial debt arising from the commercial

transaction between the parties were set out in Part IV of the said application.

We now look into the circumstances under which the financing arrangements

Company Appeal (AT)(Insolvency) No. 383 of 2025 10 of 30 were worked out, which ultimately led to Section 7 proceedings against the

CD M/s. Logix.

Binding understanding of 20.10.2020

30. One of the main planks of the Appeal is the binding understanding

between FC - Expert Realty and CD - Logix Infrastructure Private Limited

which is dated 20.10.2020 which is extracted as below:

Company Appeal (AT)(Insolvency) No. 383 of 2025 11 of 30 Company Appeal (AT)(Insolvency) No. 383 of 2025 12 of 30 Company Appeal (AT)(Insolvency) No. 383 of 2025 13 of 30 Company Appeal (AT)(Insolvency) No. 383 of 2025 14 of 30

31. Perusal of binding understanding as reproduced above herein shows

that this is an unregistered agreement and the common thread in this MOU

is Mr Hemant Sharma, Director of CD-Logix, who is also director in another

LLP- New Greens Landkart wherein Mr Niraj Gusian, the Director of FC is also

a Director. So as per Section 5(24) both FC and CD are related parties. Further

this is an 'MoU' / Agreement for the sale of 1,37,918 sq. ft, of built-up area in

the Logix Blossom Country project, Sector 137, Noida, under a buy-back

Company Appeal (AT)(Insolvency) No. 383 of 2025 15 of 30 arrangement, with the Appellant infusing about ₹15 crores between

20.10.2020 and 09.02.2021, as 'Advance against sale of Property'.

Meeting of 15.12.2021

32. We also note that another meeting took place between the Appellant-

FC-Expert and the CD-Logix on 15th December 2021.The minutes of this

meeting are extracted as below:

1

Company Appeal (AT)(Insolvency) No. 383 of 2025 16 of 30

33. The minutes of this meeting records the decision that in order to meet

the shortfall of funds Logix had offered the sale of 137918 Sq.ft. saleable area

in its project namely Blossom County at Sector 137 Noida. This has been sold

to Expert Realty vide agreement 20th October 2020 for which Expert has paid

₹15.16 Crs to Logix. It is also recorded that the units allocated to Expert Realty

has been sold to customers for a sale value of ₹46.94 Crs approximately. It

also records that Logix has paid about ₹18.88 Crs to Expert and confirms to

pay the balance amount of ₹12.88 crores and the same was to be released

without any interest within a period of one month. In case Logix fails to pay

the balance within a period of one-month interest at the rate of 18% per

annum would be leviable on the balance pay that remained due to be paid.

By this decision the CD and FC converted advance against the units to

simpliciter financial debt.

From the above minutes as also other material on record we note that:

a. CD and FC converted advance against the units to

simpliciter financial debt.

b. Mr. Hemant Sharma acted on behalf for Corporate Debtor-

Logix and Mr. Neeraj Gusain acted on behalf for

FC/Appellant-Expert.

c. Hemant Sharma and Neeraj Gusain were related parties as

they were designated partner in an LLP named as New

Greens Landkart LLP since July, 2020. Parties were related

in terms of Section 5(24)(a) read with Section 5(24A) (b) and

Section 5(24)(m)(iii).

Company Appeal (AT)(Insolvency) No. 383 of 2025 17 of 30 d. The minutes crystalizing debt of more than ₹12 Crores was

not accompanied with stamp paper.

e. Such an important decision didn't carry any Collateral or

security or agreement for the loan amount.

All above issues emerging from the decisions in the meeting have a bearing in

deciding the main issue before us.

34. For better appreciation of the nature of financial debt, part IV is

reproduced as below from the Section 7 petition:

PART - IV PARTICULAR OF FINANCIAL DEBT Total amount Rs. 15,29,55,385/- (Rupees Fifteen Crores of debit Twenty Nine Lacs Fifty Five Thousand Three details of Hundred Eighty-Five Only) transactions on which (Principle Amount alongwith 18% interest, debt fell due along with further interest at the contracted and rate till the date of actual payment of the entire Amount)

BRIEF DETAILS OF THE TRANSACTION ARE AS UNDER:

1. That the Expert Realty Professional Pvt.

Ltd (herein referred as "Financial Creditor") is into Real Estate Consultancy, Development and Construction and had entered into a business transaction with Logix Infrastructure Pvt. Ltd. (herein referred as "Corporate debtor") regarding the purchase of 1,37,918 square feet of area in the project namely Logix Blossom County at Sector 137 Noida, U.P. Accordingly the Expert Realty Professional Pvt. Ltd (herein referred as "Financial Creditor") admitted into MOU (Binding Understanding) dated 20th October, 2020 with Logix Infrastructure Pvt.

Ltd. (herein referred as "Corporate debtor).

Copy of said MOU is being annexed herewith as Annexure A-3.

Company Appeal (AT)(Insolvency) No. 383 of 2025 18 of 30

2. That Petitioner had agreed to invest in the said project at Rs. 2200/- per square feet and respondent had consented to transfer the sale proceeds over and above the said price of Rs. 2200 /- for the aforesaid area by way of return on investments made by applicant in the project.

Accordingly, the Applicant/Financial Creditor as per agreed terms in MOU, advances were made by applicant from 22.10.2020 to 09.02.2021 to the corporate debtor and has thereby made total advance of Rs.

15,00,00,000/-.

3. That as per MOU allottee/buyer of the units sold by the applicant will make the full payment of the flat to the corporate debtor and thereafter the amount over and above Rs. 2200 per Sq. feet will be paid by Logix Infrastructure Pvt. Ltd. To Expert Realty Professionals Pvt.

Ltd. as per the terms agreed between the parties.

4. That as per minutes of meeting dated 15.12.2021 Corporate Debtor confirmed that units allocated to Experts Realty Professional Pvt. Ltd. amounting to 137918 sq, ft has been sold to customers for sale value of Rs.

46,94,58,306/. However, after reconciliation of accounts reduced their liabilities and obligations in Minutes of Meetings dated 15.12.2021 whereby respondent had acknowledged their liability towards the applicant to the tune of Rs. 12,88,04,535/-

(Rupees Twelve Crore Eighty Eight Four Thousand Five Hundred and Thirty Five) payable without interest within a period of 1 month and thereafter @ at 18% per month.

Copy of Minutes of Meeting dated 15.12.2021 held between financial creditor and corporate debtor is being filed herewith as Annexure A-4.

5. That when the aforementioned amount was not paid by the Corporate Debtor, a demand notice dated 04.03.2023 was sent by the applicant which was duly served on corporate debtor. However, the corporate debtor has failed to pay any amount to the

Company Appeal (AT)(Insolvency) No. 383 of 2025 19 of 30 Financial Creditor or reply to the said notice and did not offer any explanation towards non-

payment. Copy of demand notice dated 04.03.2023 is being annexed herewith as Annexure A-5.

6. That corporate debtor has till date neither paid any amount nor given any explanation towards non-payment of Rs.

12,88,04,535 along with 18% interest p.a. which have been due and are payable as per the Minutes of Meetings held on 15.12.2021.

Copy of the ledger account issued by the corporate debtor showing the said transaction entered into between the parties is being filed herewith as Annexure A-6.

7. That there is no justification for the corporate debtor to not to pay the amount due and acknowledged and it manifestly shows that the corporate debtor is not in a position to honor its financial obligation and thus the present petition is required to be admitted against the corporate debtor.

Date from 15.01.2025 which such date debt fell due. Amount The total amount claims to be in default is claimed to be Rs.12,88,04,535/- along with 18% interest in default and p.a. payable on unpaid debt with effect from the date on 15.01.2022 till realisation. which the default occurred (Attach the workings for computation of amount and days of default in tabular form

35. Perusal of particulars of debt in Part-IV of Section 7 Application (@189),

indicates that as per MOU dated 20.10.2020 initially around ₹15 Crs was

invested by the Appellant in the project and Respondent had consented to

Company Appeal (AT)(Insolvency) No. 383 of 2025 20 of 30 transfer the sale proceeds over and above the said price of ₹2200/- for the

aforesaid qua by way of return on investments made by the applicant in the

project. Advances were made for ₹15 Crs. by the Applicant - FC-Expert.

36. But later on, as per decision taken on 15.12.2021 by the two parties,

Respondent acknowledged their liability towards the applicant to the tune of

₹12.88 Crs. (Approx) payable without interest within a period of one month

and thereafter @ 18% per month

37. By such a decision earlier investment was converted into a financial

debt. If such transactions were at arm's length, both parties would have taken

steps to safeguard their interests and one would have seen proper stamped

agreement for such a loan and noted its genesis in detail, which is missing in

the case at hand and strongly indicates collusion between the parties. When

viewed in the present conspectus of the facts, it is unpalatable and indicates

collusion. Hereinafter, we go into further details of the issue of related parties.

Issue of related party

38. We now briefly look into the issue of related parties as raised in this

Appeal. For sake of convenience, we reproduce provisions relating to related

party in the Code which are extracted as follows:

"5(24) related party, in relation to a corporate debtor, means--

(a) a director or partner of the corporate debtor or a relative of a director or partner of the corporate debtor;

(b) a key managerial personnel of the corporate debtor or a relative of a key managerial personnel of the corporate debtor;

(c) a limited liability partnership or a partnership firm in which a director, partner, or manager of the corporate debtor or his relative is a partner;

Company Appeal (AT)(Insolvency) No. 383 of 2025 21 of 30

(d) a private company in which a director, partner or manager of the corporate debtor is a director and holds along with his relatives, more than two per cent. of its share capital;

(e) a public company in which a director, partner or manager of the corporate debtor is a director and holds along with relatives, more than two per cent. of its paid-up share capital;

(f) any body corporate whose board of directors, managing director or manager, in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor;

(g) any limited liability partnership or a partnership firm whose partners or employees in the ordinary course of business, acts on the advice, directions or instructions of a director, partner or manager of the corporate debtor;

(h) any person on whose advice, directions or instructions, a director, partner or manager of the corporate debtor is accustomed to act;

(i) a body corporate which is a holding, subsidiary or an associate company of the corporate debtor, or a subsidiary of a holding company to which the corporate debtor is a subsidiary;

(j) any person who controls more than twenty per cent. of voting rights in the corporate debtor on account of ownership or a voting agreement;

(k) any person in whom the corporate debtor controls more than twenty per cent. of voting rights on account of ownership or a voting agreement;

(l) any person who can control the composition of the board of directors or corresponding governing body of the corporate debtor;

(m) any person who is associated with the corporate debtor on account of--

(i) participation in policy making processes of the corporate debtor; or

(ii) having more than two directors in common between the corporate debtor and such person; or

(iii) interchange of managerial personnel between the corporate debtor and such person; or

(iv) provision of essential technical information to, or from, the corporate debtor;"

39. Appellant claims that Mr. Hemant Sharma served as an Additional

Director with FC - Expert Realty from 12.05.2020 till 05.09.2020, i.e. for less

Company Appeal (AT)(Insolvency) No. 383 of 2025 22 of 30 than 4 months. He subsequently became a Director in the CD - Logix from

11.09.2020 and Appellant claims that this brief tenure of less than 4 months

was too short for him to influence or make policy decisions for the FC via the

CD. It also claims that Mr. Hemant Sharma was not concurrently in charge

of both companies at any point in time. But, we find that the facts materials

placed on record say a different story. We note that Mr. Hemant Sharma (DIN:

07872659) was appointed as an Additional Director in the Appellant Company

on 12.05.2020. However, as claimed by the Appellant, Mr. Hemant Sharma

ceased to be an Additional Director in Appellant Company on 05.09.2020 and

immediately thereafter, he was appointed as a Director in the Corporate

Debtor on 11.09.2020 i.e. within a span of a week. However, we note that the

Appellant Company has uploaded the Form DIR-12 regarding the cessation

of Mr. Hemant Sharma only on 6.04.2021, which was digitally signed on

26.03.2021. We also note that as per Section 169 of the Companies Act, 2013,

the Appellant Company was required to submit the said form with the RoC

within 30 days of the cessation of Mr. Hemant Sharma from the post of

Additional Director of the Appellant Company. Thus, in the facts and

circumstances we find strong force in the argument of the R2 & R3 that the

Appellant has filed backdated documents solely with the intention to support

its contention to validate the alleged transaction between the Appellant and

Corporate Debtor. We note that the Form DIR-12 regarding cessation has

been signed in April 2021 i.e. after the execution of the MoU dated

20.10.2020. Therefore, Mr. Hemant Sharma was still a Director in Appellant

Company and Corporate Debtor during the execution of the alleged MoU.

Hence, we find that prima facie there has been back-dated filing of

Company Appeal (AT)(Insolvency) No. 383 of 2025 23 of 30 documents. Moreover, both Binding Understanding of 20.10.2020 and

Minutes of Meeting dated 15.12.2021 are not registered without any witness

and will have very low credibility and strongly suggest to be forged and

fabricated documents for validating a sham transaction and defrauding of the

legitimate creditors of the Corporate Debtor.

40. We also find that the Appellant has not denied the fact that Mr. Hemant

Sharma and Mr. Neeraj Gusain are designated partners of one LLP New

Greens Landkart and their relationship existed since July, 2020, meaning

they were related parties during the transactions between the FC and the CD.

In any case MCA records @1149 APB confirm that.

41. Mr. Hemant Sharma, Director of CD-Logix, who is also director in

another LLP- New Greens Landkart wherein Mr Niraj Gusian, the Director of

FC is also a Director. So as per Section 5(24) both FC and CD are related

parties. We thus find that Hemant Sharma and Neeraj Gusain are related

parties in terms of Section 5(24)(a) read with Section 5(24A) (b) and Section

5(24)(m)(iii).

Financial statements

42. We now see whether the financial statements of the parties throw any

light on the perpetuation of fraudulent CIRP Proceedings. We note that the

Appellant-Financial Creditor-Expert in its balance sheet as on 31.03.2021

reflected the disbursement as 'Current Investments' (@1270, @1278). Neeraj

Gussain, Appellant-Financial Creditor-Expert was having 50% shareholding.

On the other hand, as per MOU/ Binding Understanding dated 20.10.2020,

alleged debt is reflected as the advance against the sale of property. Company Appeal (AT)(Insolvency) No. 383 of 2025 24 of 30

43. Further perusal of the financial statements of FC-Expert Realty reveals

that Liability of the CD-Logix, which was ₹21.16 crs as on 31.03.2021 has

come down to 'NIL' on 31.03.2022 (@1278 and 1286, 1292 APB). It is also

noticed that for the same debt, Section 7 petition was filed in the year 2023.

Neeraj Gussain is still the shareholder holding 50% shareholding in the FC

for both FYs ending 31.03.2021 and 31.03.2022 (@1273, 1289 APB). We note

that on 06.04.2023 Appellant-FC-Expert filed a Section 7 Petition before the

Adjudicating Authority alleging failure of Respondent No.1 to repay the due

amount arising out of the MoU dated 20.10.2020 & Minute dated 15.12.2021,

which didn't exist in the books of accounts. Also at the time of alleged

disbursement, nature of debt was Real Estate Allottee but FC filed the petition

as Financial Creditor by relying on alleged minutes dated 15.12.2021. We note

that investment has changed its form from investment to financial debt basis

minutes dated 15.12.2021.

44. The reply on behalf of the Respondent i.e CD-Logix in CP No. 237 of

2023 (@ page 226 APB) indicates that the Respondent CD has not been able

to pay as per the MOU dated 20.10.2021 or as per the Minutes of meeting

dated 15th December 2021 due to the financial difficulties faced by the

Respondent and as such the Respondent is not in a position to honor its

financial obligations. Furthermore, it is to be noted that Corporate Debtor-

Respondent-Logix candidly admitted the debt and default without raising any

objection. In the above background we are compelled to come to a conclusion

that this is nothing else but collusion between Logix and Expert Realty.

Company Appeal (AT)(Insolvency) No. 383 of 2025 25 of 30 How CIRP proceedings is fraudulent and malicious?

45. We note that under the Code, three critical stages must be satisfied for

initiating the Corporate Insolvency Resolution Process (CIRP) the existence of

a debt, the debt being due, and the occurrence of a default. At each of these

stages, the relationship of the applicant with the Corporate Debtor (CD)

assumes significant relevance. If the applicant is found to be a related party

to the CD at any of those stages, it casts serious doubt on the bonafides of

the initiation of insolvency proceedings and that also without disclosing the

same to the Adjudicating Authority. In the present case as noted by us herein

earlier at the time of execution of the MoU and alleged minutes, CD and FC

were related parties. We also note that even if the parties relinquish their

relationship just to avoid implication of related party, then same would not

save them from the provisions of the Code. Being aware of the same they

deliberately did not disclose the clear facts of the case to the Adjudicating

Authority and participated in the CoC. Therefore, the Adjudicating Authority

is fully empowered to pierce the corporate veil and examine the real intent

behind the filing, and it rightly did the same. In present case we note that Mr.

Neeraj and Mr. Hemant are the one who weaved the web and were related

party throughout the process being partner in the LLP. Furthermore, on

piercing corporate veil, NCLT found Section 7 proceedings to be collusive or

for extraneous purposes, such as to defeat the rights of other creditors and

manipulate the insolvency process.

46. We cannot agree with the argument of the Appellant that the

Application under Section 65 and impugned order was filed at the fag end of

Company Appeal (AT)(Insolvency) No. 383 of 2025 26 of 30 the CIRP and therefore it is not maintainable. We note that if there is fraud it

will vitiate everything including order approving the resolution plan. Thus, the

stage of CIRP is inconsequential, while considering the Section 65 application.

Further, in the present case there is no resolution plan approved till date,

even though FORM-G was issued way back on 14.10.2023.

47. We also note that it has not been denied that all the units of the project

of the Corporate Debtor were sold to all the allottees and the payment towards

the same had already been made to the Corporate Debtor, thereby confirming

that the Corporate Debtor had recovered all the funds as planned against the

said project. However, the non-payment of statutory dues by the Corporate

Debtor would lead to non-registration of units by the Noida Authority in

favour of the genuine homebuyers. Thus, in the facts and circumstances of

the case we are inclined to agree that the Corporate Debtor was trying to evade

the Corporate Debtor's obligations towards the Noida Authority, liabilities

towards genuine homebuyers who have been granted compensation/refund

of their investment as per UP RERA and Consumer Forum and derail in the

registration process of the apartments allotted to the genuine homebuyers.

The insolvency application was preferred solely to cover up such

misappropriation.

48. Appellant argues that IBC disqualifies related parties from being part of

the CoC (Section 21(2)) and from submitting a resolution plan (Section 29A),

but nowhere does it equate related party status with fraud or malice. We find

that is not borne out of the facts of the case as the CIRP proceedings have

Company Appeal (AT)(Insolvency) No. 383 of 2025 27 of 30 been found to be basis collusion and is malicious with sufficient material on

record.

49. We also note that fact related to common director was neither disclosed

in the Section 7 petition by the FC nor in the reply to said petition by the

Corporate Debtor before Adjudicating Authority. Thus, in this background,

we find that the underlying loan agreement, commercial transaction, or

financial debt was either "fraudulent" or "malicious" in nature. We find that

there are clear fraudulent activities and collusion in the business transactions

and order under Section 65 is maintainable.

50. It is to be noted that on 13.12.2023, an IA No. 6541/2023 was filed

under Section 65 by two-unit holders- R2 and R3. FC filed its reply dated

15.01.2024 to this but did not object to factual aspects raised in the

application even though it denied allegation of malicious and fraudulent

initiation of CIRP.

51. We note that Adjudicating Authority allowed Section 65 application as per

the impugned order, which is reproduced as follows:

"xvi. This Adjudicating Authority clearly observes that the Financial Creditor, M/s. Experts Realty Professionals Private Limited has used this forum for purposes other than the insolvency resolution of the Corporate Debtor with purported malicious intent, contrary to the objectives of the IBC, 2016.

xvii. Therefore, in view of our discussion, we have no hesitation in holding that the Financial Creditor has invoked the provisions of IBC against the Corporate Debtor with fraudulent, mala fide intention.

Company Appeal (AT)(Insolvency) No. 383 of 2025 28 of 30 xviii. We are therefore of the considered view that the Section 7 application bearing IB-237(ND)/2023 filed by the Financial Creditor is a collusive application filed, in collusion with the Corporate Debtor with an ulterior motive."

52. R2 and R3 has canvassed their case by placing reliance upon the

following judgments:

Ashmeet Singh Bhatia Vs. Pragati Impex India Private Limited & Anr. [NCLAT New Delhi; CA (AT) (Ins) No. 1413 of 2023]:

"....

16. The power under Section 65 of the Code can be exercised by the Adjudicating Authority only after satisfying that grounds as mentioned exist, if the Adjudicating Authority come to the conclusion that insolvency proceedings have been initiated fraudulently or with malicious intent for any other purpose other than for the resolution of insolvency of the Corporate Debtor, it can impose penalty as provided in the provision. While exercising jurisdiction under Section 65, the Adjudicating Authority is also fully entitled to close CIRP process and pass all consequential order. The mere fact that Section 7 Application has been admitted does not denude the jurisdiction of the Adjudicating Authority to examine the application under Section 65 of the Code. The observations of the Adjudicating Authority are that the Appellant is opposing the admission of the proceeding which admission has been affirmed by the Appellate Tribunal. The above does not denude the jurisdiction of the Adjudicating Authority to examine the allegations made in the Section 65 Application even after admission of the proceedings under Section 7."

18. Learned Counsel for the Respondent submitted that Application have been filed belatedly at the stage when Resolution Plan of the Corporate Debtor is under consideration. The mere fact that Application has been filed at the time when plan is under consideration does not take away the jurisdiction of the Adjudicating Authority to consider the allegations and find out the truth, if any."

The above judgment supports the cause of the respondents R2 and R3 and

the judgment squarely fits in the present facts of the case.

53. Reliance is also placed on Hindalco Industries Ltd. V. Hirakud

Industrial Works Ltd. & Ors. [NCLAT, New Delhi; Company Appeal (AT)

(Insolvency) No. 42 of 2022] wherein it was held that:

Company Appeal (AT)(Insolvency) No. 383 of 2025 29 of 30 "110. Regarding the observations in the Pratap Technocrats judgment (supra) judgment, we are of the view that the present case is a case of fraudulent and malicious initiation of CIRP, and hence, when the basic edifice on which the resolution plan of the corporate debtor is based is non-est in law, the superstructure of the resolution plan cannot sustain itself maintain its existence."

Both above judgments support the case of R2 & R3.

54. In the facts and circumstances of the case, for the reasons noted herein

earlier, we do not find any infirmity in the orders of the adjudicating authority

allowing the Section 65 application filed by the Respondents. For the reasons

noted herein we find that reversing of Section 7 proceedings doesn't amount

to a review in the guise of a fresh determination.

Conclusions and Order

55. The Appeal is, therefore, dismissed. All IAs stand disposed. No orders

as to costs.

[Justice N Seshasayee] Member (Judicial)

[Arun Baroka] Member (Technical) New Delhi.

September 08, 2025.

Pawan

Company Appeal (AT)(Insolvency) No. 383 of 2025 30 of 30