Growfitter Private Limited vs Gajesh Labhchand Jain

(Arising out of the Order dated 07.02.2023 passed by the National Company Law Tribunal, Mumbai Bench -IV in I.A. No. 1579 of 2023 in C.P.(IB) No. 923/MB/2020) IN THE MATTER OF:

Growfitter Private Limited Having its registered office at: B/104, 1st Floor, Shree Sainath Society, CHS Anand Nagar, Vakola Police Lane, Santacruz East, Mumbai- 400055. ...Appellant Versus Gajesh Labhchand Jain, The Liquidator of Talwalkars Healthclubs Limited. Having office at:- C-602, Remi Biz Court, Off Veera Desai Road, Azad Nagar, Andheri West, Mumbai- 400053. ...Respondent Present For Appellant: Mr Aditya Ajgaonkar, Mr. Gaurangi Patil, Mr. Gaurav Changrani, Advocates. & Mr. Nikhil Mhatre, Advocates.

For Respondents: Mr. Aayush Mitruka, Mr. Mohit Rohtagi & Mr. Ashwini Kumar Tak, Liquidator.

JUDGEMENT

( 21.08.2025) NARESH SALECHA, MEMBER (TECHNICAL)

1. The present appeal has been filed by the Appellant i.e. Growfitter Private

Limited under Section 61 of the Insolvency and Bankruptcy Code, 2016 ('Code') Comp. App. (AT) (Ins.) No. 605 of 2024

against the Impugned Order dated 07.02.2023 passed by the National Company

Law Tribunal, Mumbai Bench-IV ('Adjudicating Authority'), in I.A. No. 1579

of 2023 in C.P.(IB) No. 923(MB)/2020.

2. Gajesh Labhchand Jain, who is the liquidator of Talwalkars Healthclubs

Limited, is the Respondent herein.

3. The Appellant submitted that it is a service provider engaged in the

business of offering financial technology services, specifically by operating as a

payment gateway and entered into an arrangement with Talwalkars Better Value

Fitness Limited ("TBVFL") for the provision of such services in relation to

TBVFL's diverse health and wellness offerings. The Appellant submitted that

TBVFL's business activities, prior to the demerger, were not confined merely to

gym operations but encompassed a broader spectrum of wellness-related services.

The Appellant's role was however limited to facilitating payments for their entire

services and the Appellant did not form part of the core gym business of TBVFL.

4. The Appellant submitted that, the Adjudicating Authority vide order dated

21.12.2017, approved a scheme of demerger whereby only the gym business of

TBVFL was transferred to the resulting company i.e. Talwalkars Lifestyles

Limited (TLL) (subsequently renamed Talwalkars Healthclubs Limited (THL),

the Respondent/Corporate Debtor). The Appellant submitted that, pursuant to the

said scheme, the health and fitness activities including aerobics, Zumba, yoga,

spa, massage, and other such businesses were expressly retained by TBVFL, as

set out in the demerger scheme.

Page 2 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

5. The Appellant submitted that on 27.12.2017, the Appellant, through its

Promoters, entered into a Share Subscription and Shareholders Agreement

("SHA") with TBVFL, which was executed prior to the demerger. Following the

demerger, TBVFL continued to exist as a sister concern of the Corporate Debtor,

which has since been placed under liquidation pursuant to the order dated

28.04.2022, passed by the Adjudicating Authority.

6. The Appellant stated that it was in need of additional funds to support its

expansion plans and TBVFL expressed its intent to invest in the Appellant

company. Pursuant thereto, TBVFL agreed to subscribe to 9,598 freshly issued

equity shares of the Appellant for a total consideration of ₹5 crores. The Appellant

further submitted that the SHA also contains Clause 1.1.1, which defines the term

'non-fulfilment' with reference to the conditions set out in Clause 2.2 of the SHA.

As per the said clause, in the event of non-fulfilment of the obligations under

Clause 2.2 for any reason whatsoever, the Appellant company was entitled to buy

back the equity shares that were issued to the Investor.

7. The Appellant further submitted that the demerger was never fully

implemented by the ex-management of the Respondent Corporate Debtor,

resulting in ambiguity with respect to the segregation of assets between the

Corporate Debtor and TBVFL. The Appellant contended that, as per the

Respondent's own stand, while the order dated 21.12.2017 allegedly

contemplated that investments of TBVFL were to be transferred in the name of

the Corporate Debtor, it is a matter of record and admitted by the Respondent/

Page 3 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

Corporate Debtor that such transfer was neither reflected in the books of the

Corporate Debtor post commencement of CIRP nor was any intimation in this

regard found in the Corporate Debtor's records.

8. The Appellant submitted that, following TBVFL's failure to fulfil the

requirements set forth in Clause 2.2 of the SHA dated 27.12.2016, the Appellant

convened a meeting of its Board of Directors (BOD) on 05.03.2020 and the BOD

approved the exercise of the Appellant's rights under the SHA to repurchase the

shares from TBVFL at par value or, where applicable, at the lower of fair market

value. The Appellant further submitted that, in view of TBVFL's failure to fulfil

the requirements under Clause 2.2 of the SHA, the Appellant called upon TBVFL,

vide email dated 09.05.2020, to surrender its shares to the Appellant.

Accordingly, on 09.06.2020, the shares held by TBVFL were duly transferred to

the Appellant, and this transaction is properly reflected in the Appellant's

accounts. The Appellant submitted that, by virtue of this transaction, all rights of

TBVFL and any alleged rights of the Corporate Debtor arising from a mistaken

interpretation of the demerger stood extinguished in respect of these shares.

9. The Appellant submitted that the Corporate Insolvency Resolution

Process (CIRP) against the Corporate Debtor was initiated vide order dated

09.03.2021, and submitted that the extinguishment of TBVFL's interest in the

shares took place well prior to the commencement of CIRP. The Appellant

elaborated that the transaction audit report dated 24.12.2021, as relied upon by

the Respondent, has erroneously recorded that the Corporate Debtor holds

Page 4 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

approximately 19% equity share capital of the Appellant of face value Rs. 10

each. The Appellant contended that the shares have already been transferred back

to the Appellant and that Form No. SH-4, as mandated under the Companies Act,

2013, was duly executed and signed by the director of TBVFL. The Appellant

clarified that, owing to restrictions imposed by the Covid-19 pandemic, the

Appellant was unable to deliver the hard copy of Form No. SH-4 to the Registrar

of Companies.

10. The Appellant submitted that the Respondent initially filed Form MGT-

7A for the financial year 2020-21 on the Ministry of Corporate Affairs' portal,

which incorrectly reflected TBVFL as a shareholder of the Respondent as on

19.01.2022. However, the Respondent subsequently revised this Form MGT-7A

and re-submitted the audited reports for the same financial year on 28.02.2022,

rectifying the earlier error. Furthermore, the Respondent, by its email dated

22.10.2022, acknowledged that neither TBVFL nor Corporate Debtor held any

shares in the Appellant Company owing to non-fulfilment of the conditions

stipulated under investor Clause 2.2 of the SHA. Subsequently, through its email

dated 02.11.2022, the Respondent shared a revised shareholders' list confirming

the transfer of shares from TBVFL to the Appellant, thereby extinguishing

TBVFL's rights in respect of such shares as of June 2020.

11. The Appellant submitted that the Adjudicating Authority in its order dated

07.02.2024, erred in holding that there was no provision in the SHA for

extinguishing the shareholder rights in the shares held by the Respondent and that

Page 5 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

the physical share certificates were in the custody of the Applicant Liquidator,

while in reality, only digital share certificates were with him and the physical

share certificates have remained with the Appellant. The Appellant stated that the

Adjudicating Authority further erroneously concluded that the equity shares

issued by the Appellant form part of the asset pool of the Corporate Debtor and

are consequently included in its liquidation estate, and that the extinguishment of

shareholder rights was in contravention of Section 68 of the Companies Act,

2013.

12. The Appellant reiterated that the shares in question were issued to TBVFL

and not to the Corporate Debtor, pursuant to the SHA dated 27.12.2016. It is the

case of the Appellant that TBVFL, a sister concern of the Corporate Debtor,

subscribed to these shares, and the entire consideration for the issuance was paid

to TBVFL. The physical share certificates were in the possession of TBVFL and

were later taken by the Liquidator of the Corporate Debtor in his capacity as the

Liquidator of TBVFL, not the Corporate Debtor. Consequently, the Appellant

contended that these shares do not form part of the liquidation estate of the

Corporate Debtor under Section 36 of the Code.

13. The Appellant submitted that the demerger scheme defined the gym

business under Clause 2.1.5, which included only assets exclusively related to the

gym business. The investment in the Appellant was not exclusively related to the

gym business, as TBVFL's operations encompassed fitness centers and lifestyle

services. The Appellant contended that the Respondent's business, as per the

Page 6 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

Marketing Agreement, has no direct correlation with TBVFL's gym business, and

thus, the shares cannot be deemed to have been transferred to the Corporate

Debtor.

14. The Appellant submitted that the Transaction Audit Report explicitly

highlights manipulation in the Respondent's books of accounts, with the erstwhile

management inflating the value of the investment in the Appellant through

adjustments to present a healthier balance sheet. The Appellant relied on the

Doctrine of Indoor Management, as established in MRF Ltd. v. Manohar

Parrikar [(2010) 11 SCC 374], to assert that the internal affairs of TBVFL,

including the share transfer, were conducted validly. The Appellant submits that

the transfer of shares to TBVFL on 09.06. 2020, was lawful and does not involve

the Appellant or its promoters in any subsequent transfers, rendering such

considerations irrelevant to this appeal.

15. Concluding his arguments, the Appellant requested this Appellate

Tribunal to set aside the Impugned Order and to allow his appeal.

16. Per contra, the Respondent denied all averments made by the Appellant as

misleading and baseless.

17. The Respondent submitted that the Corporate Debtor, a listed public

company, was incorporated on 23.04.2016, under the Companies Act, 2013, as

part of the Talwalkars group. The Respondent further submitted that the

Appellant, GrowFitter Private Limited, was incorporated on 19.05.2016, with its

registered office in Mumbai, Maharashtra.

Page 7 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

18. The Respondent submitted that on 27.12.2016, the Appellant entered into

a SHA with TBVFL, a Talwalkars group entity. The Respondent contended that,

under the SHA, TBVFL invested Rs. 5 cr. in the Appellant in exchange for 9,598

equity shares ("Subject Shares"), representing approximately 19% of the

Appellant's shareholding. The Respondent asserted that key clauses of the SHA,

including Recital D, Recital E, Clause 2.1, and Clause 3.6, confirm TBVFL's

subscription to the Subject Shares, with payment remitted on 31.03.2017, and

physical share certificates issued on 01.04.2017.

19. The Respondent submitted that on 21.12.2017, the Adjudicating Authority

approved a scheme of arrangement vide order in CSP No. 450/2017 ("Scheme

Approval Order"), transferring TBVFL's "Gym Business," including its

investments, to the Corporate Debtor. The Respondent submitted that Clause 5.1

of the Scheme stipulates that the transfer occurred automatically without further

act or deed, vesting all rights, title, and interest in the Corporate Debtor. The

Respondent asserted that the Subject Shares, being part of TBVFL's gym

business investments (per Clause 2.2(c) of the SHA), were transferred to the

Corporate Debtor.

20. The Respondent submitted that TBVFL was admitted into CIRP on

11.01.2021, vide order in CP (IB) No. 1566/2020, and later liquidation

proceedings commenced on 28.04.2022.

21. The Respondent submitted that, while discharging its duties as Liquidator,

he noted that the physical share certificates for the Subject Shares remained in

Page 8 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

TBVFL's name, despite their transfer to the Corporate Debtor under the Scheme

Approval Order. The Respondent contended that the Appellant's annual return

(e-form MGT-7) for FY 2020-21 listed TBVFL as the holder of the Subject

Shares, while the Corporate Debtor's financial statements for FY 2018-19 and

the Transaction Audit Report dated 24.12.2021, confirmed the Corporate

Debtor's ownership.

22. The Respondent submitted that on 27.09.2022, be issued a letter to the

Appellant, requesting an update of its books to reflect the Corporate Debtor's

ownership of the Subject Shares in light of the Scheme Approval Order. The

Respondent contended that the Appellant, vide email dated 22.10.2022, denied

the Corporate Debtor's rights, claiming they were "extinguished" due to

TBVFL's alleged non-fulfilment of Clause 2.2 of the SHA.

23. The Respondent submitted that on 02.11.2022, be issued a legal notice to

the Appellant, demanding recognition of the Corporate Debtor's ownership of the

Subject Shares. The Respondent contended that the Appellant, in its email dated

02.11.2022, reiterated its position, citing non-fulfilment of SHA conditions and

sharing a revised e-form MGT-7, which the Respondent asserts was an

afterthought to manufacture a defence.

24. The Respondent submitted that, due to the Appellant's refusal, he filed IA

No. 1579/MB/2023 on 05.01.2023, under Sections 35(1) and 60(5) of the code

r/w Rule 11 of the NCLT Rules, 2016, before the Adjudicating Authority, seeking

adjudication of the ownership over the Subject Shares. The Respondent submitted

Page 9 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

that the Appellant, in its reply dated 18.07.2023, claimed the Subject Shares were

"bought back" in June 2020. The Respondent contended that, in an unauthorized

Additional Affidavit dated 18.08.2023, the Appellant further claimed the shares

were transferred to Mr. Sanmati Pandey on 09.06.2020, producing an email dated

09.05.2020, a share transfer form (SH-4), and a board resolution dated

01.06.2020, purportedly signed by Mr. Harsha Bhatkal. The Respondent asserted

that it responded to these claims in a Supplementary Affidavit dated 02.09.2023.

25. The Respondent submitted that on 07.02.2024, the Adjudicating Authority

passed the Impugned Order, directing the Appellant to issue fresh share

certificates for the Subject Shares in favour of the Corporate Debtor within seven

days (by 14.02.2024). The Respondent contended that the order was well-

reasoned, considering the Scheme Approval Order, the SHA, and the unreliable

nature of the Appellant's documents. The Respondent submitted that, due to the

Appellant's failure to comply with the Impugned Order by 14.02.2024, he filed a

Contempt Application (Cont. A/15/2024). The Respondent contended that the

Adjudicating Authority, vide order dated 14.05.2024, issued a show-cause notice

to the Appellant.

26. The Respondent submitted that this Appellate Tribunal, vide order dated

09.07.2024, directed the Appellant to comply with the Impugned Order dated

14.02.2024 of the Adjudicating Authority within 30 days to avoid further

contempt proceedings. The Respondent contended that the Appellant, vide email

dated 10.07.2024 to the Respondent No.1, and affidavit dated 12.07.2024 filed

Page 10 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

before the Adjudicating Authority, expressed its willingness to comply the order

of the Adjudicating Authority, leading to the disposal of the Contempt

Application on 15.07.2024. The Respondent submitted that, despite its emails

dated 23.07.2024, and 14.08.2024, outlining compliance modalities, the

Appellant has failed to issue the share certificates, remaining in non-compliance

with this Appellate Tribunal's order.

27. The Respondent submitted that the Appellant's persistent failure to

comply with the Impugned Order and the Appellate Tribunal's directive of

09.07.2024, constitutes contempt and justifies dismissal of the Appeal. The

Respondent contended that the Appellant's inaction, despite assurances, reflects

bad faith.

28. The Respondent submitted that the Appellant's shifting positions--

extinguishment (22.10.2022), buy-back (18.07.2023), and transfer to Mr.

Sanmati Pandey (18.08.2023)--undermine its credibility. The Respondent

contended that such inconsistencies, as held in S.P. Chengalvaraya Naidu v.

Jagannath [(1994) 1 SCC 1], disentitle the Appellant from relief due to

suppression of facts and fabrication of evidence.

29. The Respondent submitted that the Appellant's documents supporting the

alleged 09.06.2020, transfer are dubious:

• The e-form MGT-7 for FY 2020-21 lists TBVFL as the shareholder

as of 31.03.2021, contradicting the transfer claim.

Page 11 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

• The share certificate produced by the Appellant differs from

TBVFL's original, as filed in the Respondent's Supplementary

Affidavit.

• The board resolution dated 01.06.2020, is absent from TBVFL's

records and is tainted by allegations of forgery by the Gawande

Group, including Mr. Harsha Bhatkal, as stated in IA No. 419/2022

and IA No. 401/2022.

• The share transfer form (SH-4) is insufficiently stamped and lacks

proof of payment.

30. The Respondent submitted that TBVFL lacked title to transfer the Subject

Shares on 09.06.2020, as they were vested in the Corporate Debtor under the

Scheme Approval Order of 2017. The Respondent contended that any purported

transfer is void ab initio.

31. The Respondent submitted that the Appellant's reliance on Clause 2.2 of

the SHA is misplaced. The Respondent submitted that Clause 2.2 imposes best-

efforts obligations (e.g., "endeavour to" provide revenue), with no provision for

share transfer upon non-fulfilment. The Respondent asserted that the "Non-

Fulfilment" clause, allowing buy-back of unvested shares within 60 days, is

inapplicable, as the alleged transfer to Mr. Sanmati Pandey was not a buy-back,

and by June 2020, all shares were vested per the "Investment Period" definition.

The Respondent submitted that Clause 11.2 of the SHA requires TBVFL's

Page 12 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

consent for changes in capital structure, which the Appellant failed to obtain,

rendering the transfer impermissible.

32. The Respondent submitted that the Scheme Approval Order, passed under

Sections 391-394 of the Companies Act, 1956, is binding, as held in Hindustan

Lever Ltd. v. State of Maharashtra (2004) 9 SCC 438. The Respondent contended

that Clause 5.1 of the Scheme transferred the Subject Shares to the Corporate

Debtor, corroborated by the Corporate Debtor's financial statements and the

Audit Report.

33. The Respondent submitted that, under Section 35(1)(d) of the Code, he has

the authority and obligation to protect the Corporate Debtor's assets, including

the Subject Shares, justifying the filing of IA No. 1579/MB/2023.

34. Concluding his arguments, the Respondent requested this Appellate

Tribunal to dismiss the appeal with cost.

Findings

35. Streamlined for clarity, the appeal is confined to limited issue regarding

the ownership of 9598 shares of the Appellant Company held by the Corporate

Debtor and return of the same by the Appellant to the Respondent i.e., liquidator

of Corporate Debtor. We have already noted that the Appellant, who, in need of

money, issued the said shares to TBVFL for a consideration of Rs. 5 Crores,

which the Appellant had received from TBVFL on 31.03.2017 and the Appellant

issued share certificates in the name of TBVFL on 01.04.2017.

Page 13 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

36. It is noted that TBVFL was restructured after NCLT approved the scheme

vide "Scheme Approval Order" dated 21.12.2017 passed in CSP No. 405 of 2017

in CSA No. 242 of 2012, under which the gym business of TBVFL was

transferred to the Corporate Debtor and, investment pertaining to the concerned

business was also transferred to the Corporate Debtor.

37. We have gone through and examined the relevant portion of "scheme

approval order" dated 21.12.2017 and SHA dated 27.12.2016.

38. From the relevant clauses of the Scheme Approval Order dated 21.12.2017,

we note that the gym business has been defined as "gym business" of demerged

companies, comprising inter-alia the assets and liabilities including movable

assets owned by demerged company i.e., TBVFL. The movable assets of the

Corporate Debtor include the shares held in the Appellant's company. Further,

we note that, in terms of Clause 1.3, Talwalkars Lifestyles Limited which was

later re-named as Talwalkars Healthclubs Limited ("gym business") was

categorised as "resulting company" or TLL engaging business of owing,

managing and franchising gym fitness centres and health clubs.

39. We refer to clause 5.1 of the Scheme Transfer Order, pursuant to which,

upon the scheme becoming effective, the entire gym business shall, without any

further act, instrument or deed, stand transferred to and vest in, or be deemed to

have been transferred to and vested in, the Resulting Company as a going

concern, together, with all rights, title, and interest of the Demerged Company

therein, subject to existing charges and pledges, if any.

Page 14 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

40. According to the scheme approval order, the Resulting Company, which

is the Corporate Debtor under liquidation i.e., the Respondent herein, got right

over the gym business and on movable assets which included the shares held in

the Appellant's Company.

41. We have noted the contentions of the Appellant that the scheme approval

order was never fully implemented and further stated that in terms of SHA, since,

the Corporate Debtor could not perform its part and could not meet the laid down

criteria as stipulated in the SHA, the shares got extinguished.

42. The Appellant further clarified to us that to safeguard its interest, the board

resolution dated 01.06.2020 was passed by TBVFL duly signed, sealed and

stamped by the Chairman of TBVFL Mr. Madhukar Talwalkar and authorized

Mr. Harsha Bhatkal to execute form SH-4 and complete the transfer of the said

shares back to the Appellant. The Appellant further pleaded that in terms of clause

2.2 of SHA r/w definition of non-fulfilment given in SHA, entitled the Appellant

to buy-back shares which it did by making suitable payment back to the

Respondent.

43. The Appellant also rebutted the Transaction Auditors Report which

suggested that the investment in the Appellant was property of the Corporate

Debtor and pleaded that the Appellant was not party in such Transaction Audit.

44. The Appellant also argued that the aspect of extinguishing of shares or buy-

back by the Appellant or by the promoters purchasing his shares is irrelevant as

Page 15 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

for the purpose of Appellant has transferred all shares qua TBVFL and not the

Corporate Debtor.

45. We note that Appellant has consistently been changing its stand regarding

ownership and repossession of shares. The stand of the Appellant on 22.10.2022

was that shares got extinguished. The stand of the Appellant on 18.07.2023 was

that it exercised buy-back of shares. The Appellant again shifted its position on

18.08.2023 that these shares have been transferred to Mr. Sanmati Pandey. This

shifting position by the Appellant does not inspire confidence about its ownership

and legal repossession of the said shares.

46. We find many contradictions in the pleadings of the Appellant made

before the Adjudicating Authority as well as this Appellate Tribunal in the present

appeal. Such shifting stands taken by the Appellant reflects that the Appellant has

not been forthcoming with correct facts. We are not in position to accept the

pleading of the Appellant made before us that the aspects of extinguishment of

share v/s buy-back of shares v/s transfer of shares to one of its ex-promoters Mr.

Sumanti Pandey are irrelevant for the purpose of this appeal. We do not find any

logic in the contention of the Appellant and reject the same. On this aspect, we

find logic in the pleadings of the Respondent. We note that in Para 24 of

Impugned Order of the Adjudicating Authority dated 07.02.2023, which

categorically ordered the Appellant to return back the said shares to the Corporate

Debtor.

Page 16 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

47. At this stage, we reproduce the para 24 of the Impugned Order which reads

as under: -

"24. I.A. No. 1579/MB/2023: the I.A. is Allowed and the Respondent herein viz. Growfitter Private Limited is directed to issue fresh share certificates as against the corresponding 9598 equity shares in favour of Talwalkars Healthclubs Limited forthwith within a period of 07 (seven) days from the ate of pronouncement of this Order."

(Emphasis Supplied)

48. We further observe that since the said transfer was not carried out by the

Appellant, a contempt proceeding was initiated by the Corporate Debtor before

the Adjudicating Authority. During hearing before us, this aspect was also dealt,

and detailed order was passed by us on 09.07.2024 which is reproduced as under:-

"Issue notice. By the impugned order the Adjudicating Authority has allowed the application filed by the Liquidator and issued direction in Para 24 to the following effect:

"24. I.A. No. 1579/MB/2023: The I.A. is Allowed and the Respondent herein viz. Growfitter Private Limited is directed to issue fresh share certificates as against the corresponding 9598 equity shares in favour of Talwalkars Healthclubs Limited forthwith within a period of 07 (seven) days from the date of pronouncement of this Order."

Learned counsel for the Appellant submits that a Contempt Proceeding has been initiated against the Appellant. Subject to Appellant complying the said direction within 30 days from Page 17 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

today, contempt may not proceed any 2 Company Appeal (AT) (Insolvency) No.605 of 2024 further. However, any action taken in pursuance of the impugned order shall abide by the result of the appeal.

Issue notice. Let Reply be filed by the Respondent within three weeks. Two weeks' time is allowed to file Rejoinder.

List this Appeal on 22.08.2024."

(Emphasis Supplied)

49. It is pertinent to note that the Appellant has fairly conceded that he is wiling

to comply with para 24 of the Impugned Order and has sent an e-mail to the

Respondent vide e-mail dated 10.07.2024 which is reproduced as under :-

Page 18 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

50. We further take into consideration the affidavit filed by the Appellant

before the Adjudicating Authority in Contempt Petition (IBC) No. 15 of 2024 in

Interlocutory Application No. 1579 of 2023 in Company Petition (IB) No. 923 of

2020 which reproduced as under: -

Page 19 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

Page 20 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

51. However, the Respondent has brought to our notice in their Written

Submission that the Appellant, despite the Appellant's confirmation before this

Appellate Tribunal as well as before the Adjudicating Authority in the affidavit,

the Appellant has not issued shares to the Corporate Debtor.

52. If this is the case, law will take its own course and the Respondent will be

well within his right to take immediate legal action in accordance with the law, if

he so chooses.

Page 21 of 23

Comp. App. (AT) (Ins.) No. 605 of 2024

53. We further note that, as per list of equity shareholders of the Appellant filed

along with e-form MGT-7 for financial year 2020-2021, the RoC clearly stated

that TBVFL to be the holder of the subject shares as on 31.03.2021, whereas in

the appeal, the Appellant has contended that the subject shares were transferred

on 09.06.2020. We also take into consideration the pleadings of the Respondent

that the purported share certificate placed by the Appellant is not same/ identical

as the original share certificate filed before the NCLT which was found by the

Liquidator in the records of TBVFL. The Respondent had brought out all these

documents in its supplementary affidavit dated 02.09.2023 filed before the

Adjudicating Authority and these documents had been taken into consideration,

while passing the Impugned Order. We also take into consideration the fact that

the purported board resolution dated 01.06.2020 as pleaded by the Appellant

before us, has not yet been found in the record of TBVFL by the liquidator.

Incidentally, the Respondent is the liquidator of TBVFL as well as the Corporate

Debtor. We also take into consideration that forensic audit for the Corporate

Debtor was done and according to which, the subject shares were held to be the

assets of the Corporate Debtor.

54. The Appellant has taken the plea that subsequent to board resolution dated

01.06.2020, it has purchased back the shares and made the payment of Rs. 5

Crores to the Respondent. In fact, he had filed an affidavit in rejoinder before us,

wherein he has attached exhibit 'A' as the copy of the bank statement of Appellant

claiming the payment made by him towards said transfer. However, the

Page 22 of 23 Comp. App. (AT) (Ins.) No. 605 of 2024

Appellant has not pointed out specific dates and entries which he has referred

regarding payment back to the Respondent. We also tried to identify such

payment entries from the bank statement filed by the Appellant before us in the

affidavit in the rejoinder but could not find any specific entries of Rs. 5 Crores

that the Appellant claimed to have paid to the Respondent. We have also taken

into consideration the statement of the Respondent that he did not find any such

entries in the records of the Corporate Debtor and as such we are unable to accept

the arguments by the Appellant that he has paid back Rs. 5 crores while

repossession of shares.

55. Based on above detailed observations, we do not find any error in the

Impugned Order. The Appeal is devoid of any merit and stand rejected. No cost.

I.A., if any, are closed.

[Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical)

Sim

Page 23 of 23