Mohammad Javed Sultan vs M/S. Emerald Minerals Exim Pvt Ltd And ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Ins) No.966 of 2020

IN THE MATTER OF:

Mohammed Javed Sultan Director(Power Suspended) of Corporate Debtor M/s. Emarald Mineral Pvt. Ltd. Mastan Road, P.O- Buxi Bazar, Cuttack - 753 001 Odisha ...Appellant

Vs. 1. M/s. Emerald Mineral Exim Pvt. Ltd. Represented by RP (Mr. Pratim Bayal) 18/1 Tarapukar Main Road, Ghosh Para Agarpara, Kolkata - 700 091 ...Respondent No.1

2. Dhanlaxmi Bank Ltd. Ideal Plaza Kolkata Branch, 11/1, Sarat Bose Road, Police Station, Bhawanipore, Kolkata - 700 020 ...Respondent No.2

3. Bengal Shrachi Housing Development Ltd., Shrachi Tower, 686, Anandpur, E.M.Bypass - R.B.Connector Junction Kolkata - 700 107 ...Respondent No.3

Present: For Appellant : Mr. Kumud Shekhar, Advocate

For Respondents : Mr. Ajay Gaggar, Mr. Robin Singh Sirohi and Ms. Rakhi Purnima Paul, Advocates for R-1. Mr. A.N. Tiwari, Advocate for R-2.

Company Appeal (AT)(Ins) No.966 of 2020 Page 1 of 46

DR. ASHOK KUMAR MISHRA, TECHNICAL MEMBER

1. The Appeal has been filed by the Appellant under Section 61 of the

'Insolvency and Bankruptcy Code 2016' (the Code) against the impugned

order dated 20.02.2020 passed by the 'National Company Law Tribunal,

Cuttack Bench at Cuttack' (the Adjudicating Authority) in TP No.

182/CTB/2019 in COPET No. 55 of 2016.

2. The Appellant has sought the followings reliefs:

• Admit the Appeal;

• Issue Rule Nisi calling upon the Respondents as to which order

dated 20.02.2020 passed by the Adjudicating Authority shall not be

quashed being illegal, arbitrary and barred by limitation etc.

3. The Adjudicating Authority, while passing the impugned order dated 20.02.2020

has observed the followings:

"We have heard both parties. The applications,

documents are perused. The Corporate Debtor,

has conveyed the property, under 7 nomination

agreement along with the builder dated

Company Appeal (AT)(Ins) No.966 of 2020 Page 2 of 46 31.03.2013 to and in favour of M/s. Jupiter

Pharmaceuticals Limited, in other words, the

Corporate Debtor having availed the loan for

purchase of commercial property from the

applicant bank without the knowledge of the

bank. illegally has enter into an agreement, with

the concurrence of the builders and has

conveyed the property to Jupiter

Pharinaceuticals Limited. As per the Nomination

Agreement dated 31 March, 2013, the total

saleconsideration is sum of Rs. 2.26.77.250/-

(Two Crore Twenty-Six Lakh Seventy-Seven

Thousand Two Hundred and Fifty). Hence, the

property which ought to have been created as

an equitable mortgage for the loan availed by

the Corporate Debtor in favour of the applicant,

without the knowledge of the applicant has been

transferred to a 3rd party and the Corporate

Debtor has enriched himself by the illegal sale

of the commercial property, cheating and

defrauding the bank of its lawful dues. Hence,

Company Appeal (AT)(Ins) No.966 of 2020 Page 3 of 46 the loan what ought to have been a secured loan

of the banker, has become unsecured loan. And

by no means the applicant banker could

have recovered the lawful dues. The applicant

had registered FIR against the Corporate Debtor

and its Directors in respect of the illegal cheating

of the Corporate Debtor under Section

120B/420 of Indian Penal Code (IPC) and dated

25th April, 2015, same is pending. The cheques

which was paid towards the repayment of the

loan, were dishonoured by the respondent's

banker with an endorsement "funds

insufficient". Hence, the applicant bank filed CS

No. 00007/2015 before Chief Metropolitan

Magistrate at Calcutta against the Corporate

Debtor and its Directors, the same is pending on

the file of the District Court and another in 13th

MM. Court CC no: 418064/2014 the same are

pending on the file of the District court.

Meanwhile, the Applicant bank had also filed

application winding up before the Hon'ble High

Company Appeal (AT)(Ins) No.966 of 2020 Page 4 of 46 Court of Odisha vide COPET No. 55 of 2016 on

28th September, 2016. After constitution of this

Bench, the same has been transferred to this

Bench and re-numbered as TP No.

182/CTB/2019 and this application has been

taken up under Section 7 of the Code.

The debts and the default are proved beyond

reasonable doubt. Financial Creditor has

suggested the Name of Mr. Pratim Bayal having

registration No. IBBI/IPA-003/IP/-

N00213/2018-19/12385 and E-mail id:-

pratimbayal@gmail.com residence at 18/1,

Tarapukur Road, Ghoshpara, Panihati(m), North

24 Parganas, West Bengal. There is nothing on

record to say that any disciplinary proceedings

against the proposed Insolvency Resolution

Process. This application is defect free. Hence,

we ADMIT the application".

Company Appeal (AT)(Ins) No.966 of 2020 Page 5 of 46

4. The submission made by the Appellant/ pleadings and Written

Submission available on record are stated herein below in a summarized

manner:

a. It is the case of the Appellant that the date of default of 'Non-Performing

Assets' (NPA) on 05.07.2014 and the Bank/ R2 has filed petition under

Section 7 of the Code on 11.12.2019.

b. There is no default by the Corporate Debtor as the Respondent No.3 i.e.

Bengal Sharchi Housing Development Ltd. had agreed through the

'Quadpartite Agreement' (for short 'Agreement') dated 29.06.2011

(appearing at page no. 149 -153 of the Appeal paper book vide clause 7

of the said agreement) to pay the dues of the bank in case of default

arising out of any event, sale, transfer of the subject property, which

was financed by the R2/Bank.

c. The Agreement is between M/s. Emerald Mineral Exim Pvt. Ltd (R1),

Bengal Shrachi Housing Development Ltd (R3) and West Bengal

Housing Infrastructure Development Corporation Ltd (WBHIDCL).

d. The clause so stated in the said Agreement for brevity and clarity are

produced herein below:

Clause 7 - the Builder assures and confirms that the

Said Unit as well as the said building and the

appurtenant thereto are not subject to any

Company Appeal (AT)(Ins) No.966 of 2020 Page 6 of 46 encumbrance, charge or liability of any kind

whatsoever and that the entire property is free and

marketable.

Clause 8- The Builder also confirms that it has taken

necessary permissions/approvals/sanctions for

construction of the said building from all the

concerned competent authorities and the

construction of the building as well as the said unit

is in accordance with the approved plans and the

said unit is meant for residential purposes as per the

sanction.

Clause 9- The builder and the Borrower agrees and

undertakes to inform and give proper notice to the

cooperative housing society as and when formed,

about the said unit being so mortgaged to DLB.

Clause 10- the Builder has given its consent that the

DLB shall have a lien on the Sale Unit and that the

Borrower shall furnish the said unit as security for

Loan to DLB and create mortgage in favour of the

DLB and as and when the sale deed/ lease deed/

deed of apartment of the said unit is executed it will

Company Appeal (AT)(Ins) No.966 of 2020 Page 7 of 46 be sent directly to DLB. Borrower (x) Co-Borrower (x)

Builder (x)7.

Clause 11- The Builder undertakes not to mortgage

the said unit to any other financial institutions for

raising any loan. The original lease deed/ sale deed

executed is in the possession of the Builder.

Clause 12- The Builder has no objection to the

Borrower mortgaging the said Unit to DLB as

security for Loan agreed to be advanced by DLB for

the purpose of purchasing the said unit. Subsequent

to the sale deed in respect there of having been

executed after the Builder has received the entire

sale consideration and all related charges for the

Flat from the Borrower.

Clause 13- The Builder agrees and undertakes not

transfer the said unit to any other member or other

person without the previous written consent of DLB.

Clause 14- In the event of default by the borrower, if

DLB enforces the security by sale, the Builder would

accept the purchaser/s of the said unit as a buyer,

on such purchaser complying with the necessary

Company Appeal (AT)(Ins) No.966 of 2020 Page 8 of 46 formalities which are required to become a buyer of

the Builder, DLB may ask the Builder to cancel the

agreement to sell with the Borrower in case DLB

feels constraint to recall the Loan to the Borrower in

terms of this Agreement.

Clause 16- The Builder hereby assures that the

Builder shall ensure timely completion of the project

and shall keep DLB informed in the event of any

material changes in the planning of the project.

Clause 17- It is understood between the parties

hereto that DLB has/shall obtain the consent of the

borrower to retain the custody of the agreement to

sell/sale deed/conveyance deed (including any

other valid title document), entered /to be entered

into between the Borrower and the Builder, till such

time the terms and conditions of grant of Loan to the

Borrower are complied with.

Clause 18- The Borrower shall keep DLB saved,

harmless and indemnified against any loss,

damages, expenses, claims, actions which the DLB

may suffer based on the representations made by

Company Appeal (AT)(Ins) No.966 of 2020 Page 9 of 46 the Borrower and Builder, in this Agreement and

believing such representations to be true.

Clause 19- The Loan amount alongwith other dues

is recallable on demand. DLB may recall the entire

Loan from the Borrower on any default or event of

Default made by the Borrower, or on the Borrower

being declared as insolvent or incapable of handling

its affairs or for delays in the completion of the

project, which, in the opinion of DLB would affect the

repayment of the quality of the security or for any

reason which, in the sole discretion of DLB,

warrants recall of the Loan amount and other dues.

Clause 20- DLB reserves its right to transfer or

assign this Agreement in favour of any bank,

institutions or body in connection with the Loan

granted under the Home Loan Scheme of DLB to the

Borrower for the purchase of the said unit to be

construed by the Builder.

Clause 25- This Agreement shall be governed by any

construed in all respects with the Laws in India and

the parties hereto hereby mutually agree that any

Company Appeal (AT)(Ins) No.966 of 2020 Page 10 of 46 matter or issues arising hereunder or any dispute

hereunder shall, be subject to the exclusive

jurisdiction of Courts and Tribunals at Kolkata. W.B.

in India. Nothing in this provision shall prevent the

Bank from initiating any other proceedings, in any,

part of India, as it deems fit and the Borrower and

the Builder/Owner unequivocally and irrevocably

consents to the same."

e. The Appellant has also stated that the 'Nomination Agreement' dated

31.03.2013 entered into between the parties, is another proof which

was signed by the Builder with complete knowledge that the dues of the

Bank/R2 has to be paid by R3.

f. It was also stated by the Appellant that the copy of the Nomination

Agreement was handed over to the Bank/R2 as well by the CD on

22.04.2013 (appearing at page 126 &127 of the Appeal paper book) for

brevity and clarity, the same is depicted below:

Company Appeal (AT)(Ins) No.966 of 2020 Page 11 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 12 of 46 g. The Builder being the owner of the property sold the property to third

party on 10.06.2013 without taking a 'No Dues Certificate' from Bank

Company Appeal (AT)(Ins) No.966 of 2020 Page 13 of 46 fraudulently and the R3 has enriched himself by collecting 3.79 Crore

for a property of Rs. 2.26 Crore and the same is depicted below:

The sale deed signed by the builder mentions that the properties

free from all encumbrances.

h. It was also stated by the Appellant in OA No. 104 /2016 before the DRT-

3 Kolkata, the Builder proposed to pay Rs. 1.50 Crore as Security

against the claim of Bank for Rs. 1.80 Crore (included Leftover principal

Company Appeal (AT)(Ins) No.966 of 2020 Page 14 of 46 and interest accumulated) and the amount is still lying with the bank

as per the order of DRT-3 Kolkata vide order dated 29.04.2022,

annexure 1 enclosed has given below:

Company Appeal (AT)(Ins) No.966 of 2020 Page 15 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 16 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 17 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 18 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 19 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 20 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 21 of 46 i. It was also stated by the Appellant that the DRT proceedings are still

going on and has blamed Resolution Professional (RP) that he is not

representing properly to the CD being biased and acting for the

Applicant Bank. He has also levelled allegation that the RP and Bank

Company Appeal (AT)(Ins) No.966 of 2020 Page 22 of 46 is working in consortium to harm the CD rather to maximize the assets

or find resolution. It was also stated that the Builder (R3) who

deliberately avoided to appear before this Appellate Tribunal even after

ex parte order dated 12.02.2021 is continuously pursuing its matter

before DRT -3 Kolkata (for short DRT) and the Bank/R2 is deliberately

not informed the DRT regarding the ongoing CIRP & Liquidation

proceedings and R1 is not deliberately represented by the Liquidator

before the said court at the behest of the Bank/R2.

j. The Bank/R2 has failed to recover its dues from the Builder (R3) before

the Adjudicating Authority in CA No. 120 of 2018, later started to

illegally recover its dues from the Appellant and R1 Company by filing

an application under Section 7 of the Code before the Adjudicating

Authority which is illegal, arbitrary and unsustainable in law.

k. It was also stated that the Appellant through R1 Company by letter

dated 22.04.2013 has informed the Bank/R2 that it has been illegally

& deliberately disbursed the partial loan of Rs. 1,34,00,000/- to the

Builder (R3) without received the required documents including the

NOCs from the Bankers and illegally & fraudulently imposed the loan

on the Appellant and R1 Company w.e.f. 01.07.2011 against the

provisions given in the Agreement dated 29.06.2011. In spite of

Company Appeal (AT)(Ins) No.966 of 2020 Page 23 of 46 repeated request, the builder (R3) or the Bank/R2 have miserably failed

to produce the said NoCs before any forum.

l. It was also stated that the Appellant has accused the R2/Bank of Foul

play & fraud as the process to sale the property was initiated after

informing the R2/bank as stated (supra).

m. The R2/Bank failed to reply the said letter and so also miserably failed

to resolve the issue with the Builder (R3) and the Builder never gave

possession of the property or transferred the property to the R1

Company. Hence, the power to transfer the property was with the

Builder (R3) only and not with the Appellant or R1 Company.

n. The Appellant has also stated that as per Clause 6 of the said

Agreement dated 29.06.2011, the R3/Builder shall clear the dues of

the R2 Bank before transferring the said property to any buyer, the

Builder/R3 has failed to do so but subsequently deposited the dues of

the R2/Bank amounting to Rs. 1,50,00,000/- on 26.09.2016 in

pursuant to order dated 20.09.2016 passed by the DRT (appearing at

page no. 177 of the Appeal Paper book).

o. It was also stated that the Hon'ble Calcutta High Court by order dated

19.11.2019 vide C.O. 1019 of 2018 also found that the R2/Bank has

made out an arguable case against the Builder (R3) and also recorded

the submission in its interim order that the Builder (R3) has

Company Appeal (AT)(Ins) No.966 of 2020 Page 24 of 46 perpetuated fraud. The copy of the said order is depicted below:

Company Appeal (AT)(Ins) No.966 of 2020 Page 25 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 26 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 27 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 28 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 29 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 30 of 46 p. The Appellant has again reiterated the issue that the date of NPA on

05.07.2014 and the petition was filed before the Adjudicating Authority

on 11.12.2019 which is barred by limitation under Article 137 of the

Limitation Act, 1963.

q. The Appellant has cited various judgments for supplementing its

claims:

• Mediquip Systems (P) Ltd Vs. Proxima Medical System GMBH,

Civil Appeal No. 1811 of 2005

• Mobilox Innovations (P) Ltd. Vs. Kirusa Software (P) Ltd. (2018) 1

SCC 353.

• Hamza Haji Vs. State of Kerala and Anr. (2006) 7 SCC 416

• Union of India Vs. Ramesh Gandhi (2012 (1) SCC 476

Company Appeal (AT)(Ins) No.966 of 2020 Page 31 of 46 • S.P.Chengalvaraya Naidu (Dead) By Lrs. Vs. Jagannath (Dead) by

Lrs. & Ors. (1994) 1 SCC 1

• A.V.Papayya Sastry and ors. vs. Government of A.P and Ors. (AIR)

2007 SC 1546

• State of AP & Anr. Vs. T Suryachandra Rao (2005) 6 SCC 149

• Bhaurao Dagdu Paralkar Vs. State of Maharashtra & Ors. (2005)

7 SCC 605

5. The submission made by the Respondent No.2/ pleadings and Written

Submission available on record are stated herein below in a summarized

manner:

a. The Ld counsel for the R2/ Bank has stated that Sanction letter dated

27.04.2011 of Rs. 1.5 Crore was issued to Respondent No.1 company

for purchasing flat from the Builder/ R3 and disbursed of Rs. 1.34

crore directly to the Builder/R3.

b. The learned counsel for the R2/Bank has sought permission to

mortgage the flats to be built by Builder and supposed to go to R1

Company and the Bank has obtained Corporate Guarantee also.

c. It was also stated by the Ld counsel for the R2/Bank that the CD was

making payment of the dues in installment alongwith interest to the

R2/ Bank till 12.04.2014 and the CD has already paid a sum of Rs.

54,13,999.87 to the R2. Thereafter postdated cheques for repayment of

Company Appeal (AT)(Ins) No.966 of 2020 Page 32 of 46 loans started dishonoring or bouncing on its dues which promoted the

R2 bank to initiate proceedings under Section 138 of the Negotiable

Instrument Act, 1881.

d. The R2/Bank has also filed a criminal complaint against the CD and

its Directors before the 'Chief Metropolitan Magistrate' in Calcutta. In

the meantime, the CD without seeking permission or consent from the

R2/Bank executed a 'Nomination Agreement' dated 31.03.2013

alongwith the Builder and transferred the said property/unit in favour

of M/s. Jupiter Pharmaceuticals Ltd. The R1 acted in a fraudulent

manner of entering into the said 'Nomination Agreement' which was in

complete breach on the Agreement dated 29.06.2011.

e. It was also stated by R2 that the R1 to repay the loan borrowed from

the R2/ bank, the Bank initiated proceedings before the DRT against

the builder/CD/Guarantors etc. by filing O.A No.104 of 2016 before the

DRT for recovery of a sum of Rs. 1,80,32,125.50 as on 11.12.2015

alongwith future interest till the date of realization.

f. The R2 has also filed a complaint letter dated 06.02.2016 to IBA

bringing out the malafide intention of the builder. The builder filed an

application bearing IA No.742 of 2016 in the said O.A no. 104/2016

before the DRT for withdrawal of the letter dated 06.02.2016 sent to

IBA by the R2/Bank. The Builder agreed to deposit an amount of Rs.

Company Appeal (AT)(Ins) No.966 of 2020 Page 33 of 46 1.50 Crores with the R2 Bank as a security for withdrawal of the said

letter. Thereafter, the DRT vide its order dated 20.09.2016 directed to

R2/Bank to withdraw the letter subject to the deposit of the said

amount of Rs. 1.50 Crores by the builder on 26.09.2016 against the

DRT order, appeal was made by the R2/Bank before the DRAT, Kolkata

which got dismissed and thereafter, the Bank has filed 'Revisional

Appeal CO No. 1019 of 2018 before the Hon'ble High Court of Calcutta.

g. It was also stated by the R2/ bank that the Bank has filed a petition

bearing no. 55/2016 on 28.09.2016 under Sections 433, 434 and 439

of the Companies Act against the CD before the Hon'ble High Court of

Cuttack and, thereafter, the Hon'ble High Court vide order dated

19.04.2019, transferred the petition to NCLT, Cuttack by virtue of

Notification dated 07.12.2016 of the Central Government and the

Adjudicating Authority has admitted the said application and initiated

CIRP against the R1 company.

6. The submission made by the Respondent No.1/ pleadings and Written

Submission available on record are stated herein below in a summarized

manner:

a. It was stated by the R1 that the CD was declared as a NPA on

05.07.2014.

Company Appeal (AT)(Ins) No.966 of 2020 Page 34 of 46 b. It has also stated that the case has filed before the Hon'ble High Court

under the provisions of the Companies Act and thereafter it was

transferred to Adjudicating Authority.

c. It was also stated that the bank has disbursed the money to the builder

without taking permission of the CD. The said allegation is not correct

as per the Agreement as stated above. The amount of Rs. 1.50 Crore

deposited by the Builder against the loan borrowed by the CD has not

been interpreted correctly.

7. We have carefully gone through the pleadings of the parties and extant

provisions of the Code including their written submissions and we are having

the following observations:

a. It is not in dispute that the Debt has become NPA on 05.07.2014 and Section

7 application for initiation of 'Corporate Insolvency Resolution Process'

has been filed on 11.12.2019 by R2/Bank.

b. It is also not in dispute that the bank/ R2 has filed a petition before the

Hon'ble High Court of Orissa and the same was transferred to NCLT,

Cuttack Bench in terms of Notification dated 07.12.2016 of the Central

Government.

c. The various lists of dates which is appearing in appeal paper book are

enumerated herein below:

Company Appeal (AT)(Ins) No.966 of 2020 Page 35 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 36 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 37 of 46 Company Appeal (AT)(Ins) No.966 of 2020 Page 38 of 46 d. There are several issues involved in this case:

Company Appeal (AT)(Ins) No.966 of 2020 Page 39 of 46 i. The Debt was disbursed to the Builder for Rs. 1.34 Crore

without receipt of necessary documents including NOCs

from the Banks (SBI & UBI) of the Builder.

ii. The Bank/R2 has also filed C.A No. 120/2018 before the

Adjudicating Authority for recovery a due from the builder.

iii. The Bank/R2 has filed multiple proceedings before the DRT-

3 Calcutta and simultaneously persuade for recovery against

the CD/ Appellant under Section 138 of the Negotiable

Instrument Act, 1881 apart from filing criminal complaint

which is barred under Section 18 and 34 of the 'RDDBFI Act,

1993'. When the OA No. 104 /2016 was filed before the DRT

then what was necessity of enforcing criminal complaint and

approaching under Negotiable Instruments Act, 1881.

e. The Appellant was not aware of the winding up petition filed before the

'Hon'ble Orissa High Court' on 28.09.2016 and came to know about only

when the Adjudicating Authority issued notice to the Appellant. The Bank

has already received Rs.1.50 Crore from the builder and Rs. 54,13,999.87

from the CD. The deliberation made by all the parties as one feature

common with the loan has been directly disbursed to Builder/R3 and the

Bank/R2 as failed to be cautious while releasing the money to the builder

Company Appeal (AT)(Ins) No.966 of 2020 Page 40 of 46 without taking NOC from their bankers and has initiated in all these legal

proceedings.

f. It is a grey area, where even Hon'ble Supreme Court Judgment in the case

of 'State of A.P.& Anr. Vs. T.Suryachandra Rao reported in (2005) 6 SCC

149 has held that suppression of a material document could also amount

to a fraud on the court. A similar observation was also made by the Hon'ble

Supreme Court in the case of Bhaurao Dagdu Paralkar Vs. State of

Maharashtra & Ors. (2005) 7 SCC 605, wherein it was noted that

suppression of a material document would also amount to a fraud on the

court. Although, negligence is not fraud, it can be evidence of fraud. A

reference is also invited in the case of Nova Scotia (2003) 2 Comp LJ129

(Del), Hon'ble Delhi High Court held that the winding up petition would not

be maintained, once proceedings are filed by the bank before the DRT that

the Company judge was also to undertake the same task, namely, whether

there is any debt which may amount to adjudication of the claim of the

petitioning creditor. This is clear from the following observations:

"14. It is trite law to state that a winding up petition

is not akin and similar to legal proceedings for the

recovery of money. The jural reality is that the

Petitioning creditor has only one objective in mind

while invoking Section 433 & 4334 of the Companies

Company Appeal (AT)(Ins) No.966 of 2020 Page 41 of 46 Act, and that is for effecting a recovery of his

outstanding. In the present day and age when legal

proceedings are costly, cumbersome and time

consuming, it would be difficult, may well nigh

impossible to find an altruistic person who initiates

legal action solely with the humorous creditors of a

sinking company in mind. Even at the stage of issuing

notice of a winding up petition, the company judge is

not expected to act mechanically, since winding-tip

orders have wide dimensions and fatal

consequences. The Judge examines whether a prima

facie case has been made out to disclose the

respondent company's recalcitrance or inability to

pay its debts. The Company Judge thereafter perforce

carefully considers the defence put forward by the

respondent company. Till this stage, the judge does

nothing that is contrary (to) or different (from)

adjudication which according to the Concise Oxford

Dictionary is to decide judicially regarding a claim,

etc. After the introduction of the RDR Act, I find it

difficult to accept the preservation of the jurisdiction

Company Appeal (AT)(Ins) No.966 of 2020 Page 42 of 46 of the Company Judge to adjudicate upon matters

which fall within the purview of the Act. Experience

shows that although a clear admission of debt may

be absent at the stage of the issuance of notice on the

winding -up petition, it may become apparent after

the pleadings have been completed. Conversely, there

may be an admission of debt, which proves to be

palpably illusory after consideration of the defense

put forward on behalf of the respondent company. In

the first case, the company judge would admit the

petition and in the second case would dismiss it. The

entire activity is one of the adjudication."

g. The Hon'ble Supreme Court in the case of Venture Global Engineering Llc

Vs. Tech Mahindra Ltd & Anr. Etc (1, November, 2017) held as follows:

"It is a well settled principle of law that commission of fraud,

misrepresentation, suppression of material facts from the

adversary in the judicial proceedings and the Court/Arbitrator

result in vitiating the entire judicial/arbitral proceedings

including judgment/order/award passed thereon once come to

the knowledge of the party concerned. On proving existence of

Company Appeal (AT)(Ins) No.966 of 2020 Page 43 of 46 commission of fraud, misrepresentation, suppression of material

facts by the party concern, the judicial/arbitral proceedings are

rendered illegal and void ab initio. This principle applies to

arbitral proceedings in question and to Award dated

03.04.2006 and thus renders both void ab initio."

h. This case is also reflecting that the Bank has not disbursed the money to

the Corporate Debtor directly. However, as alleged by the CD, they have

taken some blank cheques and have up filled the amount and other thing

which is subject to verification whether a fraud has been committed or not.

A disbursement of financial debt from a creditor to CD is critical and a

mandatory requirement, when there is no disbursement of debt from

creditor to CD in the nature of financial debt, the creditor cannot be termed

as Financial Creditor for the purpose of Section 7 of the Code as held in the

following judgments:

• Anuj Jain (IRP for Jaypee Infratech) V. Axis Bank

(2020) 8 SCC 401

• Indiabulls Housing Finance Ltd. Vs Rudra Buildwell

in CA(AT)(Ins) No. 172 of 2019

Company Appeal (AT)(Ins) No.966 of 2020 Page 44 of 46 • Vistara ITCL (India) Ltd. Vs. Dinkar

Venkatasubramanian & Ors. in CA(AT) (Ins) No. 703

of 2020

i. This case finally reflects that this is a forum shopping being done by

a private sector bank which is not healthy. The Code cannot be used

a recovery mechanism when the Hon'ble High Court of Orissa has

already taken a particular view and DRT has also taken appropriate

decision to get the amount realized to the Bank & the Bank/R2 has

realized Rs. 1.5 Crore from Builder/R3 and Rs. 54,13,999/- from

CD/R1 against disbursal of Rs. 1.34 Crore. CIRP mechanism is not

for a debt recovery as Hon'ble Supreme Court has already settled the

law on this aspect. Hence, CIRP cannot be used for bringing a

Corporate Debtor to liquidation & thereby enriching Private Sector

Bank.

j. In view of the above facts and circumstances of the case as also law

laid down on the subject; We feel that the Corporate Debtor for the

reason(s) aforesaid, we set-aside the impugned order dated

20.02.2020 passed by the Adjudicating Authority ('National Company

Law Tribunal, Cuttack Bench at Cuttack') in TP No. 182/CTB/2019

in COPET No. 55 of 2016. In the result, 'Corporate Debtor' -

'Emerald Mineral Exim Pvt. Ltd' is released from the rigour

Company Appeal (AT)(Ins) No.966 of 2020 Page 45 of 46 of the 'Corporate Insolvency Resolution Process'. All actions taken by

the 'Interim Resolution Professional'/ 'Resolution Professional' and

'Committee of Creditors', if any, are declared illegal and set-aside. The

Resolution Professional is directed to handover the records and assets

of the 'Corporate Debtor' to the Director of the 'Corporate Debtor'

immediately.

k. The Appeal is allowed with the aforesaid observations and directions.

Pending application, if any, stands disposed of.

Interim order, if any, stands vacated. No order as to costs.

[Justice M.Venugopal] Member (Judicial)

(Dr. Ashok Kumar Mishra) Member(Technical)

2nd August, 2022

New Delhi Raushan.K

Company Appeal (AT)(Ins) No.966 of 2020 Page 46 of 46