Nityank Infrapower & Multiventures ... vs Intex Pvt. Ltd. & Anr

(Arising out of Order dated 21st August, 2018 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench, Mumbai in CP- (IB)-2051/NCLT/MB/MAH/2018 and M.A. No. 695 of 2018)

IN THE MATTER OF:

Nityank Infrapower & Multiventures Pvt. Ltd. ...Appellant

Vs

Invex Pvt. Ltd. & Anr. ....Respondents

Present:

For Appellant: Mr. Janak Dwarkadas and Mr. Gopal Mukherji, Senior Advocates with Ms. Bindi Dave, Mr. Pranaya Goyal, Mr. Aman Gandhi, Mr. Abhirath Thakur and Mr. Abhishek Sharma, Advocates.

For Respondents: Mr. Amit Sibal and Mr. Arun Kathpalia, Senior Advocates with Mr. Aditya Shankar, Mr. Nakul Mohta, Mr. Videsh Vaish and Mr. Lalit Mohan, Advocates for R-1.

J U D G M E N T

SUDHANSU JYOTI MUKHOPADHAYA, J.

The Respondent- 'Invex Pvt. Ltd.'- ('Financial Creditor') filed an

application under Section 7 of the Insolvency and Bankruptcy Code, 2016

('I&B Code' for short) for initiation of 'Corporate Insolvency Resolution

Process' against 'Dome-Bell Electronics India Pvt. Ltd.'- ('Corporate Debtor').

Company Appeal (AT) (Insolvency) No. 499 of 2018 2

2. 'M/s. Nityank Infrapower & Multiventures Private Limited'- Appellant

moved an intervention application impleading 'M/s. Invex Private Limited'-

as 'Financial Creditor' and 'Dome-Bell Electronics India Private Limited' as

'Corporate Debtor' (1st and 2nd Respondent respectively). The said

Miscellaneous Application has been filed under Section 7 of the 'I&B Code'

for initiation of insolvency proceedings by the 'Nityank Infrapower &

Multiventures Pvt. Ltd'- Appellant against 'Dome-Bell Electronics India

Private Limited'- ('Corporate Debtor').

3. In the intervention application, the Appellant has also preferred a

Misc. Application No. 377 of 2018 wherein 'Nityank Infrapower &

Multiventures Pvt. Ltd.' is the Applicant and 'Dome-Bell Electronics India

Private Limited' along with 'ECL Finance Ltd.', 'Hindustan Oil Ventures Ltd.'

and 'Dish TV India' are the Respondents.

4. The Applicant in the intervention application alleged that there was a

fraudulent share pledge transaction entered into by the 'M/s. Invex Pvt.

Ltd.'- ('Financial Creditor') in favour of 'M/s. Dome-Bell Electronics India

Private Limited'- ('Corporate Debtor') with the intent to defeat the legitimate

claim of the Applicant against the 1st Respondent- 'M/s. Invex Pvt. Ltd.'.

There is reference of a third entity i.e. 'Hindustan Oil Ventures', Chennai,

Tamil Nadu.

5. According to the Applicant, it is a Public Limited Company engaged in

the business of oil extraction. With the purpose to raise finances the

'Hindustan Oil' proposed to issue on private placement 16,260

Company Appeal (AT) (Insolvency) No. 499 of 2018 3

nonconvertible debentures of Rs. 10 Lakhs each having aggregate nominal

value of Rs. 1626 Crores. In the said transaction the 'Hindustan Oil

Trusteeship Ltd.' (the debenture trustee) executed a 'Debenture Trust Deed'

dated 30th December, 2016 (debenture trust deed). Pursuant to the said

'Debenture Trust Deed', the 'Hindustan Oil' issued nonconvertible

debentures having face value of Rs. 10 Lakhs each at par aggregating to Rs.

1626 Crores by the debenture trustee in favour of the Applicant- 'Nityank

Infrapower & Multiventures Pvt. Ltd. The Applicant-'Nityank Infrapower &

Multiventures Pvt. Ltd.' has become the beneficial owner of the said

debentures within the meaning of 'Debenture Trust Deed'. It was agreed

that the 'Hindustan Oil' will be liable to pay default interest at the rate of

18% which have not been paid on the respective dates. In order to secure

the payment obligation, 'M/s. Dome-Bell Electronics India Private Limited'-

('Corporate Debtor') executed a corporate guarantee deed dated 30th

December, 2016 in favour of the Applicant- 'Nityank Infrapower &

Multiventures Pvt. Ltd.'. As a result, 'M/s. Dome-Bell Electronics India

Private Limited'- ('Corporate Debtor') had guaranteed the payment

obligation of 'M/s. Hindustan Oil' in relation to the debentures.

Additionally, the payment obligation was partly secured by a share pledge

agreement also dated 30th December, 2016, entered into between the

debenture trustee and certain shareholders of 'Videocon D2H Ltd.'

including the 'M/s. Dome-Bell Electronics India Private Limited'-

('Corporate Debtor') in the said share pledge agreement. Under the said

share pledge agreement 'M/s. Dome-Bell Electronics India Private Limited'-

Company Appeal (AT) (Insolvency) No. 499 of 2018 4

('Corporate Debtor') had pledged 44,38,400 equity shares of 'Videocon D2H

Ltd.' in favour of the debenture trustee. Later on by a letter dated 13th

September, 2017, the 'Hindustan Oil' informed the Applicant that there had

been changes in the corporate structure of certain companies which had

also executed similar agreement and pledged shares in favour of the

Applicant. Similarly, the 'Hindustan Oil' also acknowledged, inter alia, that

certain shareholders of 'Videocon D2H' entered into a share pledge

agreement dated 30th December, 2016 for creation of a pledge on an greed

number of 11,34,34,303 shares of 'Videocon D2H'. The 'Hindustan Oil' had

also stated that there was a pledger in respect of 44,38,400 equity shares of

'Videocon D2H'. Therefore, according to the Applicant, the 'Hindustan Oil's'

payment obligation towards the Applicant- 'Nityank Infrapower &

Multiventures Pvt. Ltd.' was undeniable. Further, vide an order dated 27th

July, 2017, the National Company Law Tribunal approved a scheme of

arrangement for amalgamation of 'Videocon D2H' and 'M/s. Dish TV India

Ltd.'. The said scheme provides for allotment of certain number of equity

shares of the Dish TV to the shareholders of the erstwhile 'Videocon D2'

limited. Subsequent to the execution of said transaction document, the

'Hindustan Oil' committed defaults in its payment obligation. The details of

the impugned defaults have also been elaborated in the Misc. Application.

Due to occurrence of events of defaults notices were issued and other

correspondence was made. Despite reminders the 'Hindustan Oil' as well as

the 'M/s. Dome-Bell Electronics India Private Limited'- ('Corporate Debtor')

failed to pay the amount due in contravention of payment obligation in

Company Appeal (AT) (Insolvency) No. 499 of 2018 5

relation to the said debentures. In a reminder notice once again called upon

to pay the outstanding sum of Rs. 1873,39,20,000/-. In view of the said

default and in view of the indebtedness of 'M/s. Dome-Bell Electronics

India Private Limited'- ('Corporate Debtor'), the Applicant- 'Nityank

Infrapower & Multiventures Pvt. Ltd.' was constrained to file a Company

Petition. In this Application further information is given that the 'M/s.

Dome-Bell Electronics India Private Limited'- ('Corporate Debtor') was the

owner of 4,08,90,000 shares of 'Videocon D2H'. Pursuant to an oral

agreement, it was agreed that the 'M/s. Dome-Bell Electronics India Private

Limited'- ('Corporate Debtor') shall issue additional security to the

Applicant of those identified shareholding. It was found by the Applicant

that 'M/s. Dome-Bell Electronics India Private Limited'- ('Corporate Debtor')

had pledged some of those shares to a third party after the default

committed of non-payment. Through a correspondence it was found that

the 'M/s. Dome-Bell Electronics India Private Limited'- ('Corporate Debtor')

had pledged 3,40,00,000 equity shares out of the identified shareholding.

According to the Applicant, the impugned transaction was entered

fraudulently to defeat the Applicant's- 'Nityank Infrapower & Multiventures

Pvt. Ltd.' claims. In a reminder notice the Applicant-'Nityank Infrapower &

Multiventures Pvt. Ltd.' had called upon 'M/s. Dome-Bell Electronics India

Private Limited'- ('Corporate Debtor') to pay outstanding amount of Rs.

2035,83,00,000/-.

6. The allegation was that although the Company was fully conscious

of its obligation towards the Applicant- 'Nityank Infrapower & Multiventures

Company Appeal (AT) (Insolvency) No. 499 of 2018 6

Pvt. Ltd.' under the said corporate guarantee it had fraudulently entered

into the impugned transaction. According to the Applicant, it was a sham

transaction for the purpose of delaying Applicant's claim against 'M/s.

Dome-Bell Electronics India Private Limited'- ('Corporate Debtor') under the

said corporate guarantee. An apprehension has been expressed that 'M/s.

Dome-Bell Electronics India Private Limited'- ('Corporate Debtor') may

create a third party right. The submission is that 'M/s. Dome-Bell

Electronics India Private Limited'- ('Corporate Debtor') be restrained from

creating any third party right in respect of its assets. The Applicant has

learnt that the 'M/s. Dome-Bell Electronics India Private Limited'-

('Corporate Debtor') had made claim before the 'Dish TV' for allotment of

equity shares in exchange for identified shareholding. The apprehension is

that on receipt of the shares, 'M/s. Dome-Bell Electronics India Private

Limited'- ('Corporate Debtor') may alienate shares or deal with those shares

to defeat the recovery. In the light of the aforementioned background, the

application was moved so that the Applicant be made an Intervener, or in

the alternate, prayer was made that the Debtor Company be restrained not

to pledge 3,40,00,000 shares in 'Videocon D2H' in favour of the 'ECL

Finance Ltd.'.

7. The Adjudicating Authority by impugned order dated 21st August,

2018 while admitted the application under Section 7 filed by 'Invex Pvt.

Ltd.'- ('Financial Creditor') and initiated 'Corporate Insolvency Resolution

Process' against 'M/s. Dome-Bell Electronics India Private Limited'-

Company Appeal (AT) (Insolvency) No. 499 of 2018 7

('Corporate Debtor'), rejected the allegation of 'collusiveness', the Appellant

having failed to establish the same.

8. The Appellant was the Intervener had taken plea that the copy of the

petition under Section 7 was not served on it, but such submission cannot

be accepted. The Adjudicating Authority has rightly rejected the plea as the

law is settled law is that only after being admitted as a party to the

litigation an Intervener can get entitlement for demand of a copy of a

pleading. It is also a settled law that the 'Corporate Insolvency Resolution

Process' is not a litigation as held in "Binani Industries Limited Vs. Bank

of Baroda & Anr. - Company Appeal (AT) (Insolvency) No. 82 of 2018

etc.".

9. Therefore, supply of copy of pleading to an intervenor does not arise.

This apart, in fact no affidavit or pleading is filed before the Adjudicating

Authority but the requisite form such as, (Form-1) is filed for application

under Section 7 or (Form-5) for filing application under Section 9. In the

said format the applicants only provide the details as required as per the

format which includes the name of the 'Corporate Debtor', 'Creditors',

amount of 'debt' and debt of 'default' etc. along with relevant enclosures

thereto.

10. For a petition under Section 65 of the 'I&B Code' or for alleged

allegation of 'collusiveness', the party moving the application is required to

prove the same. The Adjudicating Authority cannot pass any order in

absence of any corroborating evidence or statement.

Company Appeal (AT) (Insolvency) No. 499 of 2018 8

11. Section 65 of the 'I&B Code' deals with 'fraudulent or malicious

initiation of proceedings' whereas Section 66 relates to 'Fraudulent trading

or wrongful trading'. As per sub-section (1) of Section 65, if any person

initiates the insolvency resolution process or liquidation proceedings

fraudulently or with malicious intent for any purpose other than for the

resolution of insolvency, or liquidation, as the case may be, the Adjudicating

Authority may pass appropriate order of penalty in terms with the said

provision. The word 'collusiveness' have not been mentioned there but one

can prove collusion to suggest that the proceeding relating to insolvency

resolution process was initiated fraudulently in collusion or with malicious

intent.

12. Learned counsel appearing on behalf of the Appellant referred to

different agreements between 'Dome-Bell Electronics India Pvt. Ltd.',

Appellant and other third parties as also 'Share Pledge Agreement'.

According to the Appellant, the 'Dome-Bell Electronics India Pvt. Ltd.'

Pledged 44,38,400 equity shares in 'Videocon D2H Limited' and also

executed a corporate guarantee by way of further security. He has referred

to order dated 27th July, 2017 passed by the National Company Law

Tribunal, Mumbai, sanctioning the Scheme of Arrangement for

Amalgamation of 'Videocon D2H Ltd.' into and with 'Dish TV India Ltd.' Due

to defaults in repayment of the debentures, the debenture trustee sent a

demand notice to 'Hindustan Oil Ventures Limited' on 20th December, 2017.

All those facts were brought on record but the Appellant has failed to

suggest that an application under Section 7 was filed by 'Invex Private

Company Appeal (AT) (Insolvency) No. 499 of 2018 9

Limited' fraudulently or with malicious intent, for the purpose of rejecting

the application or for imposing penalty under Section 65 of the 'I&B Code'.

13. In view of the findings aforesaid and in absence of any merit, no relief

can be granted. The appeal is dismissed. No costs.

[Justice S.J. Mukhopadhaya] Chairperson

[Justice Bansi Lal Bhat] Member (Judicial)

NEW DELHI

30th November, 2018

AR

Company Appeal (AT) (Insolvency) No. 499 of 2018