Neesa Infrastructure Ltd vs State Bank Of India And Ors

M/s. Neesa Infrastructure Limited, Plot No. 278/279 Panchratna Industrial Estate Opp. Armec Cold Storage, Changodar .. Corporate Debtor/ Ahmedabad - 382 213 Appellant

Vs.

1. State Bank of India 2nd Floor, Paramsiddhi Complex Opp. V.S. Hospital, Ellisbridge Ahmedabad - 380 006

2. Indian Overseas Bank Ashram Road Branch, Chinubhai Tower Opp. Handloom House Ahmedabad- 380 009

3. Central Bank of India Mid Corporate Finance Branch, 1st Floor, Central Bank Building, Lal Darwaja, Ahmedabad- 380 001

4. Small Industries Development Bank of India Navjivan Amrit Jayanti Bhavan 1st Floor, Post Box No. 10 Navjivan P.O. .. Financial Creditors/ Ahmedabad- 380 014 .. Respondents

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 1 of 10 Present:

For Appellant: Mr. Raghvendra Bajaj, Mr. Garvit Khandelwal and Mr. Jaitegan Singh Khurana, Advocates

For Respondents:

JUDGMENT

(23rd December, 2020)

KANTHI NARAHARI, MEMBER (TECHNICAL)

The present appeal preferred aggrieved by the order passed by

the learned Adjudicating Authority (National Company Law Tribunal,

Ahmedabad Bench, Ahmedabad), in CP No. (IB)

61/10/NCLT/AHM/2018 dated 17th September, 2020 whereby the

Adjudicating Authority rejected the Application of the Appellant filed

under Section 10 of Insolvency and Bankruptcy Code, 2016 (in short

IBC).

BRIEF FACTS:

2. The Appellant is a registered Company under the Companies Act

and registered at Office of Registrar of Companies, Ahmedabad. It is

stated that one of the Promotors of the Appellant, namely Mr. Sanjay

Gupta, filed the Application before the Adjudicating Authority in Form

-6 under Rule-7 of the IBC- Application to Adjudicating Rules, 2016

seeking initiation of Corporate Insolvency Resolution Process (in short

CIRP) in respect of Appellant Company under Section 10 for the reason

that the Appellant Company was unable to meet its day to day financial

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 2 of 10 requirements and unable to pay its Financial Creditors for the reason

that the condition of marketing is not favourable and also competing

marking scenario leads to become debt strapped company. In view of

situation, the Appellant Company being unable to pay the debt due to

Financial Creditors as well as Operational Creditor.

3. Learned Counsel for the Appellant contended that the Appellant

Company filed Section 10 Application through its Promotors since all

the Directors on Board of Directors of the Appellant Company

disqualified under Section 164 of the Companies Act, 2013, thereby

while preferring Section 10 Application, there was no effective Board

of Directors. Therefore, the Promotors of the Company preferred

Section 10 Application to initiate CIRP on their own. It is submitted

that one of the Promotors, i.e. Mr. Sanjay Gupta holding 97.09 % paid-

up share capital of the Company and another Promotor i.e., Mrs. Neelu

Gupta holding 2.22 % paid-up share capital of the Appellant Company.

It is submitted that Mr. Neelu Gupta, through Special Power of

Attorney, authorised Mr. Sanjay Gupta to file Company Application

before the Adjudicating Authority.

4. Learned Counsel for the Appellant further submitted that the

Application was dismissed on frivolous grounds. He submitted that the

Adjudicating Authority ought to have considered the legal Principles

laid down by this Hon'ble Appellant Tribunal in the matter of "M/s

Unigreen Global Private Limited Vs. Punjab National Bank and

Others- Company Appeal(AT)(Insolvency) No. 81 of 2017". He

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 3 of 10 submitted that in view of rejecting the Application of the Appellant,

would adversely impact on all the stakeholders including the

employees of the Company.

FINDINGS:

5. We have gone through the records submitted by the Appellant

along with Appeal Paper Book.

6. Learned Adjudicating Authority considered the Application filed

by the Appellant and rejected the Application by passing the following

Order:

...

"18. Admittedly, as also matter or record that, the applicant is not a corporate applicant as per form 6, Clause 3, the applicant is not a director and is disqualified under Section 164, wherein the name and address of the Director is shown as "presently, there is no Director on the Board of the Company due to disqualification under Section 164 of the Companies Act 2013". However, clause 3 of form 6 further discloses that the list of promoters along with their address attached.

19. As per the list of promoters (page 7), Ms. Neelu Gupta holds 3,30,000 shares whereas as per the Special Power of Attorney (page 8) dated 5 th December, 2017, Ms. Neelu Gupta, wife of Mr. Sanjay Gupta shown to be holding 4,50,000 shares and the said SPA is executed on oath. Thus, it is amply clear that the instant application is filed on

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 4 of 10 fabricated documents. Further, the applicant has not filed/disclosed the details of the unsecured financial creditors. However, as per Annexure 4 (Page No. 11 to 15), there are as many as 241 operational debtors, which includes sundry creditors for capital goods, sundry creditors for casting project, sundry creditors (Export), sundry creditors for employee, sundry creditors for contractor, sundry creditors for rolling mill, sundry creditors for trade creditors, sundry creditors for valves, sundry creditors for others, sundry creditors for consultancy, sundry creditors for goods, sundry creditors for operation etc. However, while going through the records it is found that there is no whisper about the outstanding amount. It is also pertinent to note that if the company is really insolvent why it has not opted for winding up application. Further, affairs of the company is managed by the Directors and not by the promoters. Since the promoters are already disqualified, the applicant has no authority to file the instant application.

20. On perusal of the record it is found that there is violation of Section 10(3)(c). In the instant matter as there is no special resolution passed for filing the application. For the sake of convenience Section 10(3)(c) is reproduced herein below: -

Section 10(3)(c) The special resolution passed by shareholders of the corporate debtor or the resolution passed by at least three-fourth of the total number of partners of

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 5 of 10 the corporate debtor, as the case may be, approving filing of the application.

21. On perusal of the record i.e., balance sheet as on 31.03.2016 (page 254) it is found that under the head "deferred tax liability" an amount of Rs. 10,34,37,089/- has been shown thereby meaning that no returns have been filed by the company. It is also a matter of record that objector banks have already initiated proceedings under RDDB Act, 1993 and SARFAESSI Act, 2002 and to install the said proceedings, the applicant has filed the instant application so as to initiate moratorium and to get stayed the proceedings initiated by the banks. Under such circumstances, the instant application has no merits and, therefore, requires to be dismissed."

7. For filing an Application under Section 10 of IBC, the Corporate

Debtor shall fulfil conditions as enumerated under sub Sections 3 a, b

& c of Section 10.

8. We have perused the Application filed by the Appellant before

the Adjudicating Authority and found that there is no Special

Resolution passed by the shareholders of the Corporate Debtor or the

Resolution passed by at least 3/4th of the total number of partners of

the Corporate Debtor, as the case may be, approving filing of the

Application. Apart from the above, we have also noticed that the

Special Power of Attorney, (at page 47, Annexure-II) issued by Ms.

Neelu Gupta, wife of Mr. Sanjay Gupta holding 4,50,000 Equity Shares Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 6 of 10 of Rs. 10 each by appointing Mr. Sanjay Gupta, one of the Promotors

to act as her lawful attorney for initiation of CIRP before Court of law.

However, from the list of Promotors at Annexure-I (page-46), it is seen

that Ms. Neelu Gupta holds only 3,30,000 Equity Shares. There are

other Promotors but no Power of Attorney was issued except Ms. Neelu

Gupta. Further, in the Application it is clearly mentioned in Form-6,

part-1, coloumn-8 that there is no director on the Board of the

company due to dis-qualification under Section 164 of the Companies

Act, 2013. It is also stated in the said column that the Promotors of

the Company being involved in the management of Company, initiated

CIRP on their own. However, as per the requirements under law, there

is no Resolution passed by the Shareholders of the Corporate Debtor,

though, admittedly the Applicant Company shows that there are other

Promotors and the List of Promotors (copy) annexed at Annexure-I

(page 46). Apart from the above, Financial Creditors, namely Small

Industries Development Bank of India (SIDBI) and Indian Overseas

Bank (IOB) initiated various proceeding against the Appellant-

Company under the provisions of SARFAESI Act, 2002 and RDDB Act,

1993. Learned Adjudicating Authority made note of all the proceedings

initiated by the Financial Creditors and the proceedings are pending.

It appears that Appellant-Company with an intention to stall the

proceedings filed Application before the Adjudicating Authority with a

malafide intention and not for the interest of Financial or Operational

Creditors and stakeholders. It is also recorded in the Impugned Order

that the account of the Appellant Company was declared as NPA on

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 7 of 10 30.04.2014 and thereafter the proceedings were initiated by the Bank

under SARFAESI Act wherein the mortgaged property was sold by the

Bank for a consideration of Rs. 13,68,58,600/- and the Sale Certificate

was issued to the Auction Purchaser on 27.10.2017. Further it is also

recorded in the Impugned Order that the Bank had also filed a

Recovery Application before the Debts Recovery Tribunal at

Ahmedabad being OA No. 53 of 2015 for recovery of its dues which is

pending for adjudication. Despite all the efforts taken by the Financial

Creditors, the Appellant Company failed and neglected to repay the

loan as per the terms and conditions of the Bank. Application u/s 10

IBC in the backdrop of this factual scenario, can safely be held to have

been filed only to wriggle out of liability to pay, as determined.

CONCLUSION:

9. We are of the view that the Applicant has not approached the

Adjudicating Authority with a bonafide intention and we affirm that

the Adjudicating Authority rightly rejected the Application of the

Appellant.

10. Learned Counsel for the Appellant relied upon the judgment of

this Tribunal in the matter of "M/s Unigreen Global Private Limited

Vs. Punjab National Bank and Others- Company

Appeal(AT)(Insolvency) No. 81 of 2017". The facts of that case are

different from the facts of this case. In M/s Unigreen Global Private

Limited Vs. Punjab National Bank and Others the issue arises for

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 8 of 10 consideration where non-disclosure of facts beyond the statutory

requirements under the IBC read with relevant forms prescribed under

IBC can be a ground for dismissal of Application for initiation of CIRP.

11. In the present case, the Adjudicating Authority dealt with all

aspects including the Special Power of Attorney given by one of the

Promotors Ms. Neelu Gupta, and did not confine to only non-disclosure

of facts beyond the statutory requirements. Therefore, the learned

Counsel for the Appellant cannot rely upon the Judgment of this

Tribunal passed in "M/s Unigreen Global Private Limited Vs. Punjab

National Bank and Others- Company Appeal(AT)(Insolvency) No.

81 of 2017". Further, this Tribunal in the matter of "Gaja Trustee

Company Private Limited & Ors. Vs. Haldia Coke and Chemicals

Private Limited- Company Appeal (AT) (Insolvency) No. 137 of

2017" held that the Application under Section 10 of IBC cannot be

filed by the Board of Directors of a Company without prior approval of

the shareholders in its Extraordinary General Meeting or Annual

General Meeting.

12. Further, it is on record that the SIDBI and IOB, the Financial

Creditors have strenuously opposed the admission of Section 10

Application by filing their Counter Affidavits. We add and express that

the intention of Promotors is only to get admission and followed by

imposition of Moratorium to stall all further proceedings. The IBC

being a special legislation cannot be used as a tool to one's advantage

and other's disadvantage.

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 9 of 10

13. For the aforesaid reasons, we are of the view that the

Adjudicating Authority rightly rejected the Application. Accordingly,

the Appeal is dismissed. No orders as to cost.

[Justice Bansi Lal Bhat] Acting Chairperson

[Justice Jarat Kumar Jain] Member(Judicial)

(Kanthi Narahari) Member(Technical)

Pronounced by two Members of the Bench in terms of Rule 92(1) of

the NCLAT Rules, 2016

[Justice Bansi Lal Bhat] Acting Chairperson

(Kanthi Narahari) Member(Technical)

New Delhi

Akc

Company Appeal (AT)(Insolvency) No. 946 of 2020 Page 10 of 10