Rahul Jatinder Suri vs Rajendra K. Bhuta & Anr

Rahul Jatinder Suri ...Appellant

Versus

Rajendra K. Bhuta & Anr. ...Respondents

Present: For Appellant: Ms. Bani Dikshit, Mr. Krishan Kumar and Mr. Uddhav Khanna, Advocates. For Respondent: Mr. Mayank Krishsagar and Mr. Daryl Pariera, Advocates.

ORDER

02.12.2022: Heard learned counsel for the parties. This Appeal has been

filed against the order passed by the Adjudicating Authority (National

Company Law Tribunal), Mumbai Bench, Court II dated 05.10.2021 passed

on an application filed by the Resolution Professional.

2. An application was filed by the Resolution Professional under Section

19(2) of the I&B Code. The CIRP of the Corporate Debtor commenced on

22.07.2019. The IRP took charge only on 16.08.2019. It appears that the

Corporate Debtor being an ongoing concern, certain transactions were made

till 16.08.2019. When the IRP took charge the application was filed by the IRP

questioning three transactions which have been dealt with in Para 3 in the

order of the Adjudicating Authority. The Adjudicating Authority accepted two

transactions which were conducted by the Corporate Debtor and issued no

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direction with regard to them. However, with regard to transaction of

Rs.1,60,000/-, direction was issued to deposit the said amount with fine of

Rs.1,00,000/-.

3. Learned counsel for the Appellant submits that the Corporate Debtor

was a going concern and the Directors were informed by the IRP for the first

time by letter dated 16.08.2019 on which date the IRP took charge and before

the said date the Corporate Debtor was running as a going concern and

Corporate Debtor had infused Rs.19,75,000/-, which amount was utilized for

the payments and Rs.1,60,000/- was utilized towards the expenses for diesel

of two DG Sets. Learned counsel for the Appellant has further submitted that

the period form 22.07.2019 to 16.08.2019 has been subsequently excluded by

the order of the Adjudicating Authority, therefore, it will be treated that no

CIRP was continuing during the period, hence, the transactions were also

entitled to be excluded. Learned counsel for the Appellant submits that two

transactions have been accepted by the Adjudicating Authority, hence, there

was no occasion for not accepting the third transaction.

4. Learned counsel for the Respondent refuting the submissions of learned

counsel for the Appellant submits that after initiation of the CIRP the

Corporate Debtor had no authority to make any expenditure, hence the

application was filed under Section 19(2) for seeking appropriate directions

from the Adjudicating Authority. The Adjudicating Authority satisfied by two

transactions where Corporate Debtor has infused Rs.2,00,000/- and

Company Appeal (AT) (Insolvency) No. 853 of 2022 -3-

Rs.17,73,405/- accepted the same. Since no proof was given for transaction

for Rs.1,60,000/- the same was rejected.

5. We have considered the submissions of learned counsel for the parties

and perused the record.

6. Para 3 of the impugned order where the Adjudicating Authority has dealt

with the three transactions is extracted below which gives dates and amounts

of transactions:

"3. Three unauthorized debits/ withdrawals from the Bank Account of the Corporate Debtor is reflected in Bank statements which is Annexed as Exhibit 1 Page 4, 5 and 6 in the Affidavit of Rejoinder filed by the Applicant summarized as follows:

Sr. Date Amount Explanation by Ex- No. Debited Directors (INR) 1. 26.07.2019 1,60,000 Self-withdrawal 2. 16.08.2019 2,00,000 Payment to East West Travel and Tour 3. 16.08.2019 17,73,405 Payment of Salary, Rent and Security TOTAL 21,33,405

......."

7. In so far as submission of learned counsel for the Appellant that since

period from 22.07.2019 to 16.08.2019 has been excluded, CIRP will be treated

to be commenced from 16.08.2019 cannot be accepted. Exclusion of the

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period is for the purpose that in CIRP this period shall be added i.e. 180 days

which is provided for maximum period. The argument of learned counsel for

the Appellant cannot be accepted that date of initiation was shifted by

excluding the period. It is clear from the order of the Adjudicating Authority

that the two transactions through which the Corporate Debtor infused amount

of Rs.2,00,000/- and Rs.17,73,405/- has been accepted for which there is no

direction. With regard to expenditure of Rs.1,60,000 which is not denied by

the Corporate Debtor, in the reply which has been filed by the Corporate

Debtor to the application filed by the IRP, in Para 5.11 following has been

pleaded:

"5.11 Whilst the Applicant has accepted my explanations/clarifications given by him vide my email of 13th February, 2020 regarding the utilisation of cash in hand of Rs.1,36,000/-, the Applicant has raised a dispute with respect to the two debit entries of 16th August 2019, and has for the first time in paragraph 4.u. of this Application, sought to question purported debit entry dated 26th July, 2019 of Rs.1,60,000/-. I say that no prior point in time did the Applicant or the CoC members question or seek any explanations from me regarding this particular debit entry dated 26th July, 2019. I say that no particulars whatsoever have been provided by the Applicant in relation to the said debit entry. I say that the above amount was utilized towards expenses for the Corporate Debtor's plant. The Corporate Debtor was

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using two DG sets with the capacity of 1500 KVA. As in rainy season, there were lot of power failure in Wada region and we had a 12 KM dedicated power line. To kick start and to run the two DG sets, approximately 1500 litre was required. As supplier's payments were pending for two years, no supplier was willing to supply diesel at credit and the Corporate Debtor had to buy the diesel against cash payment and the amount of Rs,1.50,000 was utilized for procuring diesel and balance amount was expended towards expenses at plant level."

8. There was a clear pleading that the Corporate Debtor was using two DG

sets with the capacity of 1500 KVA. As in rainy season there were lot of power

failure in Wada region and to run the DG sets approx. 1500 litre was required.

The above explanation was stated in Para 5.11, as noted above.

9. We are of the view that the Adjudicating Authority erred in rejecting the

said transaction by observing that there is no proof that expenditure was for

towards the diesel consumption. When explanation was given in the reply, for

running two DG sets the expenditure of Rs.1,60,000/- towards diesel ought to

have been accepted by the Adjudicating Authority. Further the Adjudicating

Authority did not even advert to the explanation given in Para 5.11. We are of

the view that there is no occasion for imposing any fine in the facts of the

present case. The Adjudicating Authority has itself observed that the

Corporate Debtor has cooperated with the IRP and RP, in para 23. We, thus,

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are satisfied that the direction to deposit Rs.1,60,000/- and fine of

Rs.1,00,000/- deserved to be deleted and is hereby deleted.

10. We further make it clear that the law that after initiation of the CIRP the

Directors are not entitled to operate any account and use any assets of the

Corporate Debtor is well settled and present is a case where no appeal has

been filed by the Resolution Professional challenging the order in which other

two transactions have been accepted.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Barun Mitra] Member (Technical) Archana/nn

Company Appeal (AT) (Insolvency) No. 853 of 2022