Moving Pixels Private Limited vs Mr. Jitender Kothari

(Arising against the impugned order dated 22.08.2024, passed by the Ld. National Company Law Tribunal, Mumbai Bench-I, in I.A. No. 5303 of 2023 filed in C.P. (IB)/895(MB)2022)

IN THE MATTER OF: Moving Pixels Pvt. Ltd. Through its Authorized Representative Registered Office at 17th Floor, 1701-1712 D-Block, Sun Central Place, Near Vakil Saheb Bridge, ...Appellant Bopal Ambli Corss Road Ahmedabad - 380058 Gujarat.

Versus

Mr. Jitendra Kothari, RP of NDS Art World Pvt. Ltd. Residing at 702, Orchid A Wing Evershine Park CHS, Off Veera Desai Road, Andheri (W) Mumbai - 400053 ...Respondent

Maharastra.

Present:

For Appellant : Mr. Manorama Kumar, Mr. Kamal Agarwal, Advocates.

For Respondent : Mr. Kaustubh Prakash, Ms. Hita Sharma, Advocates.

Cont'd.../ -2-

J U D G M EN T (24th August, 2026)

SHARAD KUMAR SHARMA, MEMBER (J)

The genesis of the controversy, as it presently engages consideration

in this company appeal, is as a consequence of the decision taken on I.A.

No. 5303 of 2023.

2. The said IA, was filed by the Resolution Professional, before the Ld.

NCLT, Mumbai Bench, Court-I. Invoking the provisions contained under

Section 60 (5) to be r/w Section 14 (1) (b) of Insolvency & Bankruptcy Code,

2016 (in short 'Code').

3. In the application filed by Resolution Professional on 10.11.2023, had

sought for a relief for an issuance of an appropriate direction, in the shape

of an order against the appellant herein. The relief prayed for therein was for

remittance of the money, which has been alleged to have been wrongfully

transferred pertaining to the work that, had taken place prior to the period

of CIRP, however, the amount in relation to it was received after the

initiation of CIRP, without the knowledge of the Resolution Professional. The

relief thus claimed in the I.A. was structured in the following manner:

"(a) Pass an order directing the Respondents No 1 to 14 to return/ remit back the money wrongfully received from the Corporate Debtor during the moratorium period which purportedly pertains to the pre-CIRP Period as being violative of Section 14 of the Code and the moratorium imposed by this Hon'ble Tribunal.

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(b) Pass an order directing the Respondents No 1 to 14 to pay interest at the rate of 18% in terms of Section 3 of the Interest Act, 1978 on the amounts transferred received during the moratorium period

(c) Such further/other appropriate order(s) or direction(s) as this Hon'ble Tribunal may deem fit and proper in the facts and circumstances of the present case and to serve end of justice."

4. The foundation of the application thus preferred by the Resolution

Professional, before the Ld. Tribunal on 10.11.2023, it was primarily based

upon the following facts:

i. That the Corporate Debtor viz. ND S Art World Pvt. Ltd. was placed

under the CIRP in pursuance to the order that, was passed on

22.08.2023.

ii. With a consequential and simultaneous appointment of the

Resolution Professional who took over the affairs of the Corporate

Debtor.

iii. In those proceedings, the Committee of Creditors, constituted of a

solitary member i.e. Edelweiss Asset Reconstruction Company

Limited.

5. It happened so that in the first meeting of the CoC that was held on

25.08.2023, it also stood communicated to the Applicant by filing of an I.A.

i.e. being I.A. No. 4169 of 2023 this IA was disposed of by Tribunal on

13.09.2023. In those proceedings, which were held before the Ld. Tribunal,

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the Resolution Professional is also said to have filed an I.A. i.e. being I.A.

No. 3848 of 2023 in which a declaratory relief, which was sought, was for

declaring the Applicant to be entitle, to enable him to take necessary steps

as contemplated be performed under the Code. In this I.A. an order was

passed by the Ld. Tribunal on 28.08.2023. At this stage, we may not be

much concerned so far as the nature of relief sought and the order that, was

passed on I.A. No. 3848 of 2023, as that would not have much material

bearing over the controversy at hand.

6. But however it could be summarily said that, it was only a

precautionary order that, was passed owing to certain criminal acts that,

was referred to in the order dated 28.08.2023.

7. The contention of the Respondent/ Applicant, to the application, that

was filed while invoking Section 60 (5) to be r/w Section 14(1)(b) of the

Code, was that for illegal gains pertaining to the transactions and the

consequential monetary benefit, though that ventures into a pre-CIRP

period but monetary benefit accruing from were accounted after initiation of

CIRP. All these gains were said to have been received by opposite party no. 1

to 14 of the application, which was carried at the behest of opposite party

no. 15 and 16 belonging to the Corporate Debtor. Its these transactions that

were held prior to initiation of CIRP but benefit accrued post CIRP were

alleged by the Applicant/Respondent herein to be after the commencement

of the CIRP on 25.07.2023, would be in violation to the imposition of

moratorium.

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8. The precise backdrop, as it was finding reference in the application

that was preferred by the respondent, it was for the purposes of remittance

of the amount. It's the case that when upon initiation of Section 7

proceedings under the Code, by an order that, was passed on 25.07.2023,

the order of initiation of CIRP was placed in public domain by its uploading

on the site of the Ld. NCLT on 27.07.2023. Because of the foresaid fact it

could be bonafidely and under law too, be assumed that, it was brought in

public knowledge. Hence, as a consequence of the order dated 25.07.2023,

a declaration too was made under Section 14 of the Code. Giving a public

intimation as regards to the restrictions those were contained under Section

14 of the Code, for those who would be concerned with the order of

25.07.2023.

9. The respondent's case before the Ld. Tribunal, had been that, despite

acquiring the knowledge, on 11.09.2023, as regards to the fact, about a sum

of Rs. 1,01,04,908/- was lying in the current account of the Corporate

Debtor, which was standing in the IDBI bank, Karjat Branch, Raigad, the

said amount was shown to have been wrongfully transferred to the accounts

of Respondent No. 1 to 14 at the behest of Respondent No. 15 and 16 and

tabulated details of transfer of monies, was also set out and detailed in the

application that, was preferred by the respondent for the remittance of the

amount.

10. Upon acquiring knowledge of such transfer of amount from the said

account of the Corporate Debtor, for an amount of Rs.1,01,04,908/- by Company Appeal (AT) (Ins.) No. 2219 of 2024 -6-

virtue of the communication that was made by respondent, a request was

made for return of the money received by them during the moratorium

period, which pertained to the work executed in the pre-CIRP period. It was

alleged by the respondent that, it was an amount, which was received by the

appellant in violation of or of the admission of CIRP by an order of

25.07.2023, thus would be falling to be a restricted transfer due to the

imposition of moratorium Section 14 of the Code.

11. While issuing notice for calling upon for the remittance of the amount

as detailed above, a right was reserved by the applicant to have a recourse,

open to be resorted, if the notice of refund of money was not responded by

the appellant because under law the Resolution Professional after admission

of the Corporate Debtor into the CIRP, exercises an onerous responsibility of

preserving and protecting the assets of the Corporate Debtor. It aimed to

ensure that the Corporate Debtor is placed or is honestly attempted to be as

a continuous and a going concern during the CIRP period.

12. There was an utter failure on part of the appellant to remit the

amount within the time stipulated in the notice issued by the respondent,

which necessitated the issuance of a legal notice.

13. By way of a precaution, the applicant submits that, he had issued a

second notice, which constituted to be a part of the application reiterating

the encumbrance for remittance of the amount that, was wrongfully gained

by the appellant during the CIRP period, but it was of no avail. Hence, a

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notice was issued on 18.09.2023, thereby calling upon the appellant to

return the money amounting to Rs. 80 lakhs, which was received by the

appellant during the moratorium period, since the same being a transaction

having being carried and completed in violation of Section 14 of the Code.

14. There was tendering of yet another reminder of 04.10.2023,

reiterating the direction for return of money. This reminder of 04.10.2023

was ultimately responded by the appellant by filing a reply to it on

21.10.2023, herein the appellant took a defense that, it was not obligatory

for the appellant to remit the amount, as the same has not been transacted

in contravention to the norms settled as per law of moratorium. But

however in the reply of the appellant, submitted on 21.10.2023, what is

relevant is that the transfer of the amount and the period of its transfer was

falling within the period of admission of the CIRP and during the period

when the moratorium was being imposed and was in continuance, it stood

as a fact admitted.

15. Hence, the respondent came up with the case, that causing any

encumbrance or transferring alienating or disposing of the corporate

debtor's property or its assets or any legal right or benefit or interest therein

to the assets of Corporate Debtor, would be barred by Section 14 (1) (b).

Hence, the money that was received from the Corporate Debtor, was

required to be remitted back, being in violation of the moratorium imposed

by the tribunal.

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16. When this application came up for consideration before the Ld.

Tribunal, the Ld. Tribunal proceeded to allow the same by the impugned

order, while exercising its power under Section 60(5), to be r/w with Section

14 (1)(b) of the I&B Code. Holding thereof, that since the fact having been

established that the alleged transaction to be in violation of Section 14 of

the Code, which called for to meet the breaches as per the law laid under

Section 14 (1) (b) and that, it was directed to be made payable along with

the interest payable on it, at the rate of 18% in terms of Section 3 of the

Interest Act, 1978.

17. The facts that has been revealed and established are that, the bank

accounts of the Corporate Debtor did reflect that, there had been

transactions of the said amount at the behest of Respondent No. 15 and 16

after the initiation of CIRP. These transactions, which were carried without

the knowledge of the Resolution Professional, showed transfer of the amount

during the period of moratorium. The period of transfer shown in the books

against it, reflected from bank account and it corresponded with the period

when moratorium was in vogue.

18. The Ld. Tribunal after considering the impact of the reply that, was

submitted by respondent on 02.01.2025. The factum of transaction having

been carried and completed during the moratorium period is not a disputed

fact, rather the fact, that stand established by appreciation of evidence on

record i.e. the books. The stand taken by Respondent No.12 was that it had

organized an event for 'NDA MEET' at Ashoka Hotel on 18.07.2023 on the Company Appeal (AT) (Ins.) No. 2219 of 2024 -9-

instructions of Bharatiya Janata Party (BJP) and the Corporate Debtor. All

expenses towards the said meet that, had taken place in Ashoka Hotel were

paid directly by Respondent No. 12, on the basis of the prior proforma

invoices those were raised towards the same, to the Corporate Debtor.

However, prior raising of the proforma invoices are irrelevant for the

purposes of fastening of the liability and the present controversy to invoke

Section 14 of the Code because of the remittance of the amount in the book

of account of Corporate Debtor, after the imposition of the moratorium.

What is shown from the bank account is that Rs.80 lakhs, was remitted into

the accounts of Respondent No. 12, after deducting the agents commission.

Further, that it was credited by the BJP into the account of the Corporate

Debtor. Thus, the Ld. Tribunal had rightly concluded that, perusal of the

account statement that, was placed on record before it and which had also

constituted, as to be the part of the notice dated 18.09.2023, shows that the

credit of the amount did take place into the bank account of the Corporate

Debtor, it was possibly the amount credited by the BJP into the said bank

account. The entries made into the accounts showed the transaction of

money and flow of money through those transactions into the accounts of

the Corporate Debtor, which would be attributable and related to the

aforesaid event/meet, which expressly showed was in violation of Section 14

of the Code. Looking to the period of transaction and its actual completion

upon deposit of amount in the account of Corporate Debtor after imposition

of moratorium.

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19. A very peculiar stand that has been taken by the appellant, though it

cannot be taken to be sustainable in the eyes of law is from the perspective

that, they were not conscious about the initiation of CIRP process, which

stood initiated by an order of 25.07.2023 that, was passed by the Ld.

Tribunal. This stand taken by the appellant cannot be accepted under law

for the reason that, upon initiation of CIRP process, there was a declaration

made by way of an announcement that, was shown to have been made on

28.07.2023 in the local dailies of Mumbai. As this order of admission of

CIRP dated 25.07.2023 was available on the website of NCLT, as uploaded

on 27.07.2023 and also made public by public announcement as prescribed

under Section 13 (2) Section 15 of the Code. There would be a deeming

presumption that, there had been a concrete and a positive knowledge of

the imposition of moratorium and invocation of Section 14 of the Code,

owing to the effect of Section 13 to be read with Section 15 of the Code.

Hence, the analogy, which could be rationally inferred is that after

declaration of CIRP and invocation of Section 14 of the Code, the Corporate

Debtor only acts as a custodian of the estates of the company. The stand

taken by the respondent in their defense that, they were working as an

accountant and as a staff and they were not aware of the order of the legal

proceedings cannot be accepted by us as ignorance cannot be accepted

under law, more particularly when the factum of transaction, during that

period is a factum admitted. The claim of the respondent, further stands

strengthened when an additional fact was brought on record, that

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Respondent No.11 i.e. the Maharashtra State Electricity Distribution Co.

Ltd. has adjusted the payment made to them on 28.08.2023, against the

subsequent invoices raised during the CIRP period and the amount was

refunded back.

20. The exception that, has been ventured to be carved out by the

appellant in the proceedings before the Ld. Tribunal that, the money that

was paid by the Corporate Debtor on 28.07.2023, will amount to a money

held in trust by the Corporate Debtor. This is an altogether an alien

philosophy, because Section 14 of the Code, itself doesn't carves out any

exception of this nature under law as such. And also because of the fact

that the BJP in pursuance to the holding of an event is shown to have paid

Rs.1 crore to the Corporate Debtor on 27.07.2023 out of which Rs. 80 lakhs

belong to Respondent No. 12 and that fact would be apparent from the

letter, which was placed on record on 20.05.2024. Acknowledging the

success of the event and the invoices too in itself, which reflects that

Respondent No.12 has charged the money as per the documents of the

invoices attached to it. More particularly when the appellant was taking

recourse to an existence of a trust. The burden to prove the same was to be

discharged by the appellant himself and there was no established

relationship of trust or there was even no establishment of the fact that Rs.

80 lakhs constituted to be the amount that was held in trust by the

Corporate Debtor, hence, there was a direction for refund of the amount.

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21. Though, not a case, which was ever pleaded or even argued by the

appellant before the Ld. NCLT, but for the first time it has been argued by

the appellant before us, that the recourse under Section 60(5) to be r/w

Section 14 (1)(b) was not available to the respondent, owing to the fact that

the recourse available to the respondent would have been under Section 74

of the Code. The implications of Section 74 of the Code was an issue, which

could be effectively determined on application of fact and law, which was

never argued or established to be argued before the Ld. Tribunal nor it was

even a ground agitated in this appeal too in that eventuality, and more

particularly when the appellant when is arguing this company appeal as of

now. Because of the subsequent amendment made under the Code, since

Section 74 has already been deleted from the statue, no recourse or shelter

as of now can be taken to it by the appellant. Owing to omission of the

provision by Insolvency and Bankruptcy Code. (Amendment) Act, 2026, as

made effective w.e.f 06.04.2026.

22. Even if it is presumed, accepting though not admitting the tenacity of

arguments of learned Counsel for the appellant that, the recourse available

to the respondent would have been under Section 74 of the Code. Infact this

argument of the appellant would be twin edged sword; because (1) He would

be admitting the entire factual controversy; (2) He would be rather admitting

the entire transaction that has taken place during the CIRP and that the

liabilities flowing from it. And the only controversy that would be left to be

argued to be considered while opening argument by way of invocation in

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context of Section 74 of the Code, would be as to what recourse was to be

adopted. But owing to the omission of the provision, since Section 74 of the

code, its impact was never argued before the Ld. Tribunal nor any finding

was recorded by the Ld. Tribunal so no recourse can be taken by the

appellant to it by the Ld. Counsel for the appellant in Section 74 of the

Code, and the only remedy left for the purposes of the actions to be taken

upon violation of provisions contained under Section 14 of the Code would

be by recourse of Section 14 (1) (b). Since the conduct and transactions are

the fact established, the directions contained in the impugned order are not

at all violative of any provisions of law, which would call for any

interference.

23. The learned Counsel for the appellant had made a reference to a

Judgment as rendered by this bench in Comp. App. (AT) (Ins.) No. 956 of

2021 in the matter of 'Writer Business Services Pvt. Ltd. & Anr. vs. Mr.

Ashutosh Agrawala Resolution Professional for Cox & Kings Ltd.'

particularly when the learned Counsel has made reference to paragraph no.

26 & 27, this Judgment is itself was rendered on 04.02.2022, when the

provision of Section 74 was in vogue, hence this Judgment will have no

applicability under the facts and circumstances of the instant case.

24. Because of the stipulations contained under Section 13 (1) (b) to be

r/w Section 15, which makes it mandatory to cause a publication, which is

to be read with provisions of Regulation No. 6 as contained under the IBBI

Insolvency Corporate Persons Regulation, 2016. The declaration made Company Appeal (AT) (Ins.) No. 2219 of 2024 -14-

thereof would be in public domain and it would be leading to a deeming

inference and knowledge to the appellant about the imposition of

moratorium. For the aforesaid reasons, we don't find any merits in the

company appeal and the company is accordingly dismissed.

25. The directions issued for remittance of the amount on account of the

established transaction that, had taken place during the CIRP period. The

attraction of Section 14 (1) (b) is not violative of any provisions of law.

Hence, the company appeal lacks merits and the same is accordingly

dismissed.

[Justice Sharad Kumar Sharma] Member (Judicial)

[Arun Baroka] Member (Technical)

[Indevar Pandey] Member (Technical)

SA

Company Appeal (AT) (Ins.) No. 2219 of 2024