Mr. Shrenik Dhirajmal Siroya vs Siroya Fm Constructions Private ...

NATIONAL COMPANY LAW APPELLATE TRIBUNAL PRINCIPAL BENCH, NEW DELHI Comp. App. (AT) (Ins) No. 1718 of 2024 & I.A. No. 6206, 6274 of 2024 IN THE MATTER OF: Shrenik Dhirajmal Siroya ...Appellants Versus Siroya FM Constructions Pvt. Ltd. ...Respondents

Present: For Appellant : Ms. Vatsalya Vigya, Advocate. For Respondents :

ORDER

(Hybrid Mode)

23.09.2024: Heard counsel for the appellant.

This appeal has been filed against the order dated 27.02.2024 passed by

the Adjudicating Authority rejecting Section 7 application filed by the

appellant. Appellant claiming to be a Director has filed Section 7 application

who claims that the CD owned the amount to the appellant. Three intervention

applications were filed in the proceeding, it was contended by the interveners

that the application has been collusively filed by the financial creditor so as to

avoid all dues and liabilities.

2. Ld. Counsel for the appellant submit that appellant the Financial

Creditor is the Director and 50% Shareholder of the corporate debtor who

extended the financial credit to the corporate debtor. It is submitted the loan

outstanding as per Books of the Account is Rs.33,51,05,739/-. On 10.01.2020

a call notice was given demanding the payments and when no payment was made application under Section 7 was filed interest has been charged as per

Mutual Agreement.

3. We have considered the submissions of the appellant and perused the

record.

4. Adjudicating Authority in its finding has noticed that the Financial

Creditor is 50% Shareholder of the corporate debtor and other 50%

Shareholder has long expired and it is the Financial Creditor who is sole

Director under control of the affairs of the corporate debtor. Adjudicating

Authority has observed that in the proceeding under Section 7 there was no

representation of the corporate debtor which was attributable to the fact that

apart from Financial Creditor there was no other person as Director in the

management of corporate debtor.

5. Adjudicating Authority has also noticed an order of Bombay High Court

where it was noticed that the accounts of the corporate debtor were frozen from

2012-13 and the business of the corporate debtor was being received and

disbursed from their Director's account. In Para 7 of the judgment Adjudicating

Authority has made following observations:

"7. This bench takes a note of the order of Hon'ble Bombay High Court in the matter of "Ashoak Shah and another Vs. Siroya FM constructions Private Limited" (Corporate Debtor in the present petition) wherein, the Hon'ble High Court has held that:

"The Respondent's Advocate submitted that the funds from the business of the Respondent were being received and disbursed from

2 of 5 Comp. App. (AT) (Ins) No. 1718 of 2024 & I.A. No. 6206, 6274 of 2024 their Directors Accounts since the business account of the Respondents had been frozen since 2012-13".

7.1 The observation of the Bench at para 6 that the ledger entries are more in the nature of the running business account and not a financial loan get further corroborated by the statement of the Corporate Debtor (Respondent in the petition before the Hon'ble High Court) that because of the attachment of the account all monies relating to the Corporate Debtor were being received and disbursed by the Directors of the Company. The recording of the statement by the Hon'ble High Court leads to the conclusion that the disbursements which have been allegedly claimed to have given by the Financial Creditor (Director to the Corporate Debtor) as a financial loan are in affect only payment made in the natural course of business of the Corporate Debtor out of the receipts of the Corporate Debtor taken into account of the Directors (as the account of the Corporate Debtor was frozen). Hence, this bench is of the opinion that such transaction cannot come under the definition of Financial Debt."

6. The Adjudicating Authority has also expressed its severe doubt on the

confirmation letter issued by sole Director in Paragraph 8 of the judgment

following has been observed:

"The Bench also notes that the Financial Creditor is the sole Director and totally in control of the affairs of the Corporate Debtor (the other 50% Director & Shareholder being no more) and hence efficacy of the alleged "Confirmation Letter" of the Corporate Debtor is also in doubt and raises serious question on the reliability of such a document specially since there is no other corroborative evidence/ documents like

3 of 5 Comp. App. (AT) (Ins) No. 1718 of 2024 & I.A. No. 6206, 6274 of 2024 loan agreement, audited financials or any other documents showing the outstanding debt or liability."

7. The Adjudicating Authority ultimately came to the conclusion that

petition has been filed with the purpose other than resolution of insolvency and

deserved to be dismissed. The Adjudicating Authority has come to the

conclusion that petition has been filed for purpose other resolution of

insolvency. The facts and the submissions raised by the Interveners has been

noted in paragraph - 9 of the judgment. The Interveners which also included

some of the Homebuyers in their application made various allegations against

the appellant in paragraph-9 of the order following has been stated:

"9. The Bench also takes note of the pleadings in the Intervention Petition filed by some Home Buyers wherein it is alleged that:

a. There are number of cases pending before the Hon'ble High Court of Bombay, Maharashtra Real Estate Regulatory Authority and Economic Offences Wing of the Corporate Debtor filed by Home Buyers wherein the Interveners have alleged that the Financial Creditor has filed this collusive and misleading petition for initiation of the insolvency and resolution process on the Corporate Debtor and that the present petition filed by the Financial Creditor is merely to evade from all the dues and liabilities which he is directed by the Hon'ble High Court.

b. There are no Audited Financial Statement of the Corporate Debtor since 2016.

c. The Corporate Debtor has not filed annual return with ROC (Registrar of Companies) since 2016.

4 of 5 Comp. App. (AT) (Ins) No. 1718 of 2024 & I.A. No. 6206, 6274 of 2024 d. As Admitted by the Corporate Debtor in COMM. ARBITRATION PETITION (L) NO. 43 OF 2016 in clause 14 on page 9 of the said Arbitration petition funds from the business of the Respondent No. 2 was being received and disbursed from the directors account since the business accounts of Respondent No. 2 has been frozen by the Income Tax Department since 2012-13.

e. The Financial Creditor in his application in clause 8 on page 24 states that he sent demand notice dated 10.01.2020. The Intervener states that from the ledger annexed it can be seen that the Financial Creditor continued to advance amounts to the Corporate Debtor till March, 2021 which is highly questionable as to why did the Financial Creditor continue to advance amount to Corporate Debtor after it defaulted to the first demand notice dated 10.01.2020."

8. The Adjudicating Authority having noticed facts and submissions has

rightly not accepted the claim of appellant as a financial debt. The application

was not for resolution of any insolvency and was file for other purposes. We do

not find any error in the order of Adjudicating Authority. There is no merit in

Appeal. Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Arun Baroka] Member (Technical) harleen/NN

5 of 5 Comp. App. (AT) (Ins) No. 1718 of 2024 & I.A. No. 6206, 6274 of 2024