Mohinish Kumar & Ors vs Premsons Super Steels Private Limited & ...

(Arising out of the Order dated 12th March, 2021 passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi, Court-III), in I.A. No. 4000/2020 in C.P. No. (IB)-404(ND)/2018)

IN THE MATTER OF:

1. Mohinish Kumar S/o. Krishan Kumar, R/o. 239, Ghee Mandi, Pahar Ganj, New Delhi - 110055. ...Appellant No. 1.

2. Naresh Katyal S/o. Chunni Lal, R/o. B - 102, 2nd Floor, Double Story Quarters, Motia Khan, Pahar Ganj, New Delhi - 110055. ...Appellant No. 2.

3. Rakesh Kumar S/o. Chunni Lal, R/o. B - 102, 2nd Floor, Double Story Quarters, Motia Khan, Pahar Ganj, New Delhi - 110055. ...Appellant No. 3.

Versus

1. Premsons Super Steels Private Limited Registered Office at Khasra No. 29/10, Ground Floor, Street No. - 17, Near Shiv Mandir, Village: Libaspur Delhi - 110042. (In Liquidation)

Through

Mohit Chawla Liquidator Having office at: SCO-2935-36, Sector 22-C, Chandigarh - 160022 0172-5086551 ; ipservices@embeegrooup.in ...Respondent No. 1

2. Sanjeev Kapoor S/o Kuldeep Singh -2- Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

R/o. 14/1333, Kishanpura, Saharanpur - 24701. ...Respondent No. 2

3. Pooja Kapoor W/o. Sanjeev Kapoor R/o. 14/1333, Kishanpura, Saharanpur - 24701. ...Respondent No. 3

Present

For Appellants: Appeared but appearance not marked. For Respondents: Appeared but appearance not marked.

WITH

COMPANY APPEAL (AT) (INSOLVENCY) NO. 106 of 2021

(Arising out of the Order dated 27th February, 2020 passed by the Learned Adjudicating Authority (National Company Law Tribunal, New Delhi, Court-III), in C.A. No. 614/2019 in C.P. No. (IB)-1702(ND)/2019)

IN THE MATTER OF:

1. Mohinish Kumar S/o. Krishan Kumar, R/o. 239, Ghee Mandi, Pahar Ganj, New Delhi - 110055. ...Appellant No. 1.

2. Naresh Katyal S/o. Chunni Lal, R/o. B - 102, 2nd Floor, Double Story Quarters, Motia Khan, Pahar Ganj, New Delhi - 110055. ...Appellant No. 2.

3. Rakesh Kumar S/o. Chunni Lal, R/o. B - 102, 2nd Floor, Double Story Quarters, Motia Khan, Pahar Ganj, New Delhi - 110055. ...Appellant No. 3.

Versus

1. Premsons Super Steels Private Limited Registered Office at Khasra No. 29/10, Ground Floor, Street No. - 17, Near Shiv Mandir, Village: Libaspur -3- Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

Delhi - 110042. (In Liquidation)

Through

Mohit Chawla Liquidator Having office at: SCO-2935-36, Sector 22-C, Chandigarh - 160022 0172-5086551 ; ipservices@embeegrooup.in ...Respondent No. 1

2. Sanjeev Kapoor S/o Kuldeep Singh R/o. 14/1333, Kishanpura, Saharanpur - 24701. ...Respondent No. 2

3. Pooja Kapoor W/o. Sanjeev Kapoor R/o. 14/1333, Kishanpura, Saharanpur - 24701. ...Respondent No. 3

Present

For Appellants: Appeared but appearance not marked. For Respondents: Appeared but appearance not marked.

JUDGEMENT

[Per; Shreesha Merla, Member (T)]

1. Challenge in these Appeals, Comp. App. (AT) (Ins.) No.279/2021 and

Comp. App. (AT) (Ins.) No.106/2021 is to the Impugned Orders dated

12.03.2021 and 27.02.2020 respectively passed by the Learned Adjudicating

Authority (National Company Law Tribunal, New Delhi, Court - III) in

I.A.4000/2020 in IB No.-404/ND/2018 and in C.A. No. 614/2019 in C.P. (IB)

No.-1702(ND)/2019 and respectively. Since both these Appeals arise out of

the common facts and are preferred by the same Appellant, they are being

disposed of by this common Order.

2. For ready reference, the Impugned Order dated 27.02.2020 is

reproduced as hereunder:

-4-

Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

"The prayer inter alia is for modifying order dated 23th July, 2019 passed in CP No. IB 1702 of 2019.

During the course of hearing it has been noted that the applicant has filed one CA which was wrongly listed under Section 7 of IBC, 2016, in the said CA the prayer was made for setting aside the order dated 10.12.2018 on the ground of stating wrong facts before this adjudicating Authority.

It is recalled that an application under Section 10 of IBC was filed by Prem Sons Super Steel Pvt. Ltd., supported with special resolution, which was admitted by this Authority, and CIRP was initiated, Moratorium was declared and IRP was appointed. The CIR Process has already been completed and as per the submissions made by the counsel for the applicant the application seeking liquidation order is pending.

This Authority vide its order dated 23.07.2019 on this basis of the CA filed by the applicant, who claims to be the major shareholder of the Corporate Debtor viz., Prem Sons Super Steel Pvt. Ltd. has passed an order dismissing the CA against which the applicant has filed Company Appeal (AT) (Insolvency) No. 959 of 2019 which was dismissed as withdrawn, however, liberty was granted to re-agitate the matter. Further, it was advised to this authority to do well by first taking of the applicant's application before considering the application filed for seeking liquidation.

It is noted that the order that came to be passed on 10.12.2019 in IB 404 of 2019 was not carrying any error apparent on the face of record, it is only the CA which has been filed by a shareholder of the Corporate Debtor, that was dismissed by this authority on 23.07.2019, against which an appeal has been filed before the Hon'ble NCLAT.

Once an application is admitted under Section 10 of the IBC filed on behalf of the Company viz, Prem Sons Super Steel Pvt. Ltd. and CIRP is initiated Moratorium declared, IP appointed, even the CIRP is over and CoC has recommended for liquidation of the Corporate Debtor the only remedy available under law against the order dated 10.12.2018 is to file appeal under Section 61 of the IBC, 2016, before the Appellate Authority. Therefore, the present application is not maintainable and stands dismissed."

-5-

Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

3. Vide this Order, the Learned Adjudicating Authority has recorded that

the Corporate Insolvency Resolution Process ('CIRP') was over and that the

Committee of Creditors ('CoC') has already recommended for Liquidation of

the Corporate Debtor Company.

4. Learned Counsel appearing for the Appellants contended that the

Respondent Company/M/s. Premsons Super Steels Private Limited has filed

Insolvency Petition (IB) 404(ND)/2018 under Section 10 of the Insolvency and

Bankruptcy Code, 2016, (hereinafter referred to as 'The Code') seeking

initiation of CIRP on the strength of forged and doctored documents. Vide

Order dated 10.12.2018, CIRP was initiated against the Corporate Debtor

Company. It was only in May 2019 that the Appellants got knowledge of the

Section 10 Application having been admitted before the Adjudicating

Authority. In June 2019, the Appellants filed an Application IB1702(ND)/19

seeking recall and setting aside of the Order dated 10.12.2018, but the said

Application was wrongly listed under Section 7 of the Code. On 23.07.2019,

the Adjudicating Authority dismissed this Application holding that once CIRP

is triggered, a fresh Section 7 Application cannot be entertained. The

Appellants assailed the Order dated 23.07.2019, in 'Mohinish Kumar &

Ors.' Vs. 'Mohit Chawla'1, before this Tribunal inter alia on legal grounds,

including typographic errors. On 03.09.2019, the Appellants also filed CA

614/2019, in CA (IB) 1702/2019 before the Adjudicating Authority seeking

rectification of the Order. Subsequently, on 05.02.2020, the Company Appeal

was withdrawn with a liberty to have the rectification Application decided. On

27.02.2020, the Adjudicating Authority passed the Impugned Order, in CA

1 Comp. App. (AT) (Ins.) 959/2020 -6- Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

614/2019. Subsequently, on 28.08.2020, the Adjudicating Authority allowed

CA 528/C-III/ND/2019, filed in CP (IB) No. 404/ND/2018 filed by Mr. Mohit

Chawla/the Liquidator thereby initiating Liquidation Proceedings against R-

1 Company. Thereafter the Appellants moved an Application bearing no. IA,

4000/2200 under Sections 65, 72 & 77 of the Code, inter alia seeking

directions against the Respondents 2 & 3 for malicious and frivolous initiation

of CIRP.

5. It is submitted by the Appellant that the Adjudicating Authority did not

take into consideration that a 'fraud' was played on the Court and that the

Appellant being 62.5% Equity Shareholder was kept in the dark about the

filing of CP (IB) NO. 404(ND)/2018 and that they were never given any Notice,

nor did they give any consent or pass a Resolution approving this Auction.

The real purpose of filing this Company Petition was to frustrate the rights of

the Appellant to whom Respondents 2 & 3 were to pay considerable amount

of money for the Shares as per the Memorandum of Settlement dated

15.03.2016 decreed by the Learned Company Law Board ('CLB') vide Order

dated 17.03.2016. Upon conclusion of the Execution Proceedings,

Respondents 2 & 3 handed over the cheques to the Appellants which were

dishonoured. The 'Corporate Debtor' is mandated to produce the Audited

Financial Statements of the past Financial Year, which it has failed to do so

and yet the Adjudicating Authority has initiated the CIRP. Respondents 2 & 3

are liable for prosecution under Sections 65, 72 & 77 of the Code for filing a

malicious Application.

6. Learned Counsel placed reliance on the Judgement of the Hon'ble

Supreme Court in 'S.P. Chengal Varaya Naidu (DEAD) by LRs.' Vs. -7- Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

'Jagannath (DEAD) by LRS. & Ors.'2, and in 'A.V. Papayya Sastry & Ors.'

Vs. 'Govt. of A.P. & Ors.'3 and also the Judgement of this Tribunal in 'M/s.

Unigreen Global Pvt. Ltd.' Vs. 'Punjab National Bank & Ors.'4 in support

of his submissions that there was a 'fraud' and that it is mandated to ensure

that compliances required to be made in Application under Section 10 of the

Code are complete in all respects or not.

7. It is vehemently contended by the Appellants that it was only to deceive

this 62.5% Shareholders that the Respondents initiated this Auction.

8. IA 4000/2020, which is the Impugned Order dated 12.03.2021 reads

as follows:

"Counsel for the Applicant is present. Counsel for the Liquidator is present. The relief sought in the application are extracted below:

a) Impose the maximum penalty in terms of Section 65 of the IB Code upon Respondents No. 2 and 3 for fraudulent and malicious initiation of CIR proceedings in C.P. No. (IB)- 404(ND)/2018;

b) Direct the Insolvency and Bankruptcy Board of India and or any other relevant person/ authority to initiate proceedings against Respondents No. 2 and 3 and their associates/ agents under Sections 65, 72, 77 and/or other applicable provisions of the IB Code as well as the Companies Act, 2013 for furnishing false information, for wilful and material omissions from statements relating to the affairs of the Corporate Debtor, and for playing a fraud on the Corporate Debtor, its shareholders and other stakeholders;

c) Pass orders under Section 213 of the Companies Act, 2013 requiring appointment by the Central Government of Inspector(s) to investigate the affairs of the Corporate Debtor;

2 (1994) 1 SCC 1 3 (2007) 4 SCC 221 4 Comp. App. (AT) (Ins.) No. 81/2017 -8- Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

d) Direct the Insolvency and Bankruptcy Board of India to carry out an inspection and investigation into the conduct of Respondent No. 1 in his capacity as the RP in the CIR Process of the Corporate Debtor;

e) Declare the CIR Process of the Corporate Debtor initiated vide order dated 10.12.2018 and Liquidation Process initiated vide order dated 28.8.2020 as a nullity, illegal and non-est in law on the ground of fraud played by Respondents No. 2 and 3;

f) Pass such other/further order(s)/direction(s), order(s)/direction(s), which this Hon'ble Adjudicating Authority may deem fit and proper in the facts and circumstances of the present case."

As to prayers (b) & (d), the applicant may directly approach to the IBBI by way of appropriate application/complaint to seek reliefs, as desired.

As to prayer (a), there is no material on record to suggest that the initiation of CIR Process under Section 10 of the IBC through CP No. IB-404/ND/2018 was fraudulent and malicious, mere irregularity does not constitute fraud and malice.

As to prayer (c), the circumstances do not suggest that there requires a direction to the Central Government to appoint inspector(s) to investigate the affairs of the Corporate Debtor.

As to prayer (e), the Applicant had efficacious remedy available under Section 61 of the IBC, 2016 to file an appeal against the order dated 28.08.2020 passed by this Authority. Moreover, the CIR Process is over and Liquidation Process is almost complete.

In light of the above, Application is devoid of merits and stands rejected.

The order is dictated through video conference in the presence of the counsels for the Applicant and Liquidator."

9. In the Impugned Order, it is recorded that the CIRP Process is over and

the Liquidation Process is almost complete and that mere 'irregularity' does

not constitute 'fraud' or 'malice'.

-9-

Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

10. At the outset, we address to whether the initial Order of Admission of

Section 10 was challenged or not. It is not in dispute that the Section 10

Application was admitted on 10.12.2018. It is also an admitted fact that the

Appellants filed Application IB1702(ND)/2019, which they submit was to

recall or set aside the Order of Admission but was wrongly listed under

Section 7 of the Code. An Appeal preferred against that Order in 'Mohinish

Kumar & Ors.' (Supra) was dismissed as withdrawn with a liberty to

reagitate the matter. It was observed by the Adjudicating Authority that there

was no error apparent on the face of record in IB 404/2019. It is submitted

by the Learned Counsel for the Respondent/Liquidator, Mr. Abhishek Anand

that the Appellants have approached this Tribunal with unclean hands and

that they have filed multiple Applications which were all dismissed and in fact

they have no Locus Standi to prefer this Appeal as they are no longer

Shareholders of the Companies, as they have transferred their Shares to the

second Respondent and have also handed over the Share Certificates to the

second Respondent.

11. We observe from the record that the Special Resolution dated

23.06.2018, was attached to the Application filed under Section 10 before the

Adjudicating Authority, which consists of the Board Resolution dated

15.03.2018, which confers a right upon the 'Corporate Debtor' to

file/represent under Section 10 of the Code. The Hon'ble Apex Court in 'M/s.

Unigreen Global Pvt. Ltd.' (Supra) has held that 'Section 10 does not

empower the Adjudicating Authority to go beyond the records as prescribed

under Section 10, and the information has required to be submitted in Form-6

of the Insolvency and Bankruptcy (Application to the Adjudicating Authority), -10- Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

Rules, 2016, subject to ineligibility prescribed under Section 11. If all

information provided by an Applicant as required under Section 10 and Form-6

and if the Corporate Applicant is otherwise is not an ineligible under Section 11,

the Adjudicating Authority is bound to admit the Application and cannot reject

the Application on any other ground'. In the instant case, the Application is

complete with respect to the requirement mandated and moreover, any

'irregularity' would not contemplate 'fraud' or 'malice'.

12. We also take into consideration that the Liquidator had put the Assets

of the 'Corporate Debtor' on e-Auction vide Publication dated 17.11.2020, and

the Auction dated 21.12.2020 for a total amount of Rs.618.73Lakhs/- for

Land and Building and Plant and Machinery. It is submitted by the Liquidator

that in the first Auction itself, the Land and Building and Plant and Machinery

of the 'Corporate Debtor' was sold at a price which is much above the Reserved

Price and fetched a total value of Rs.898.73Lakhs/- and the payment has also

been received from the Successful Bidders and distributed amongst the

Shareholders.

13. Having regard to the fact that the CIRP Process is over, the Liquidation

Process is almost complete as on the date of Impugned Order i.e., 12.03.2021

and the Assets were sold at a good price and sale proceeds were distributed

amongst the Shareholders, we do not see any ground to set the clock back or

to interfere with the Orders of the Adjudicating Authority dated 27.02.2020

and 12.03.2021 respectively.

14. Furthermore, a perusal of the material on record shows that the

Appellant and Respondents 2 & 3 entered into a Memorandum of Settlement

on 15.03.2016 and the Petition was disposed of vide Order dated 17.03.2016. -11-

Comp. App. (AT) (Ins.) No. 279 & 106 of 2021

The Appellants also filed an Execution Petition under Section 634 of the

Companies Act, 2013, wherein vide Order dated 18.01.2018, the Adjudicating

Authority has observed as follows:

"In view of the Decree Holder's prayer for civil imprisonment, the same can be done through the concerned District Court as the order of the Court recording the compromise has to be enforced as a decree. The same can be filed before the concerned District Judge for execution."

15. It is seen from the aforenoted Order that the remedy available for the

Appellants was to file appropriate Proceedings before the Civil Court instead

of trying to enforce the decree by way of an Application under Section 65 of

the Court. The Adjudicating Authority has, rightly after going through the

Prayers of the Appellants and material on record, and also considering the

stage of the Liquidation Process, dismissed the Application.

16. These Appeals are devoid of merits and are dismissed accordingly. No

Order as to costs.

[Justice Anant Bijay Singh] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

Principal Bench, New Delhi 25th January, 2023

himanshu