Rajesh Kumar Agarwal & Ors vs Srivani Merchants Pvt. Ltd. & Anr

1. Rajesh Kumar Agarwal, Son of Ramjilal Agarwal, Residing at Flat No. 3E,3, Lower Rowdown Street, Police Station: Ballygunge, Kolkata - 700020; 2. Smt. Kavita Agarwal, Wife of Rajesh Kumar Agarwal, Residing at Flat No. 3E, 3 Lower, Rowdown Street, Police Station: Ballygunge, Kolkata - 700020; 3. Chayank Agarwal, a minor represented By his father and natural guardian Rajesh Kumar Agarwal, residing at Flat No. 3E,3, Lower Rowdown Street, Police Station: Ballygunge, Kolkata-700020; ...Appellants Versus 1. M/s Srivani Merchants Pvt. Ltd., A company incorporated under the Companies Act, 1956 and having its Registered office at 12/2, Sovaram Bysack Street, 1st Floor, Police Station: Burrabazaar, Kolkata-700007 2. M/s RLA Holdings Pvt. Ltd., A company incorporated under the Companies Act, 1956 and having its registered Office at 545, G.T.Road, 1st Floor, Howrah-711101. ...Respondents

For Appellant: Mr. Indranil Ghosh, Mr. Palzer Moktan and Mr. Akash Yadav, Advocates

For Respondent: Mr. Nikhil Jain, Advocates for R-1 2

ORDER

18.03.2020 Heard Learned Counsel for the Appellants and for Respondent

No. 1. This Appeal has been filed by the Appellants and they have challenged two

orders passed by the Adjudicating Authority (NCLT) Kolkata Bench, in CP (IB)

No. 616/KB/2017. One order is dated 16th May, 2019 (Annexure A1) by which

order the Adjudicating Authority passed orders of Liquidation and the other

order is dated 17th May, 2019 passed by the Adjudicating Authority by which the

Liquidator was changed who had been earlier appointed vide order dated 16th

May, 2019.

2. The grievance of the Appellants is that they had filed three applications

before the Adjudicating Authority. One was for impleadment, the second was to

consider them as Resolution Applicants and the third claimed that the Appeal

Proceedings of 'CIRP' were vitiated because of fraud attracting Section 65 of

Insolvency and Bankruptcy Code, 2016 (IBC In Short). The Learned Counsel

submits that without deciding the applications of the Appellants, the

Adjudicating Authority proceeded to pass orders of Liquidation as period for

completing 'CIRP' had come to an end and no Resolution Plan had been received.

3. The Learned Counsel for the Appellants states that the controversy

revolves around Flat No. 3E, 3 Lower Rowdon Street, Police Station - Ballygunge,

Kolkata. According to Learned Counsel, this property belonged to the father of

the Appellants namely Mr. Ramjilal Agarwal and he had incorporated the

Corporate Debtor M/s RLA Holdings Pvt. Ltd.. It is stated that subsequently,

there was oral family arrangement in 2013 and this Flat was allotted to the

Company Appeal (AT) (Insolvency) No. 669 & 689 of 2019 3

Appellants and the Appellants are in possession since the time of allotment. The

Appellants are neither shareholders nor directors of the Corporate Debtor.

4. The Learned Counsel has argued that the Application under Section 7 of

Insolvency and Bankruptcy Code, 2016 was filed by Original Financial Creditor

'M/s Srivani Merchants Pvt. Ltd.' against the Corporate Debtor- M/s R.L.A.

Holdings Pvt. Ltd.. Subsequently, the Application came to be admitted and when

public notice was issued by the IRP, the Appellants had come to know about the

admission of such Application under Section 7 of IBC. It is stated that when the

IRP sought possession of the Flat from the Appellants, the Appellants had

resisted and claimed that the Flat did not belong to the Company and had moved

Application before Adjudicating Authority. Learned Counsel states that the

Application remained pending and the 'CIRP' continued and ultimately

Liquidation orders have been passed and it is stated that now Liquidator wants

to take over the property.

5. When we ask the Learned Counsel for Appellant to show as to how the

property is claimed to be belonging to the Appellants, the Learned Counsel

merely referred us to Annexure A7 page 316 which is copy of Plaint of Title Suit

No. 85 of 2015 filed in the Court of Second Civil Judge Sr. Division at Alipor. It

is stated that the Suit is still pending.

6. The Learned Counsel states that the Application which was filed by the

Financial Creditor was a collusion between the Financial Creditor and Directors

of the Corporate Debtor as they are aware that the only asset of the Company is

the concerned Flat. The Learned Counsel states that one Uttam Chand

Choudhary had signed the Application under Section 7 as authorised

representative of the said Financial Creditor 'M/s Srivani Merchants Pvt. Ltd..

Company Appeal (AT) (Insolvency) No. 669 & 689 of 2019 4

This aspect is not disputed. The Learned Counsel has then referred to page 61

of the Appeal, where there is Directors report for the year ending 31st March,

2014 (Annexure A4) to point out that the Directors report accompanied by the

Auditor's Report shows that the same Mr. Uttam Chand Choudhary has been

the Chartered Accountant of the Corporate Debtor. It is thus, claimed that there

was collusion between the Original Financial Creditor and the Directors of the

Corporate Debtor.

7. The Learned Counsel for the Respondent submits that this Mr. Uttam

Chand Chaudhary is CA also of the Original Financial Creditor 'M/s Srivani

Merchants Pvt. Ltd.' and is not any shareholder or director of M/s Srivani

Merchants Pvt. Ltd. and it is stated that there is no question of any collusion

and the said Mr. Uttam Chand Choudhary was only acting due to profession.

8. The Learned Counsel for Respondent further claims that the property

concerned is property of the Corporate Debtor and thus, the Appellants have no

cause to hold on to the property.

9. Having gone through the matter, we refer to the Title Suit filed by the

Appellants themselves where in Para 9 'c', it is clearly stated by these Appellants

that the concerned Flat mentioned above is standing in the name of defendant

No. 10 (In that Suit) i.e. is the present Corporate Debtor. The said paragraph

reads as under:

"c. The property situated at Flat No. 3E, 3, Lower Rowdon Street, Police Station- Ballygunge, Kolkata- 700020, within the aforesaid jurisdiction standing in the name of the defendant No. 10 would stand exclusively allotted to the plaintiff no. 1 exclusively. The said property is morefully mentioned and described in Schedule A hereto."

Company Appeal (AT) (Insolvency) No. 669 & 689 of 2019 5

10. The Appellant in that Suit sought decree of declaration that they are in

lawful possession in terms of the family arrangement and the same can not be

disturbed. The Learned Counsel for the Appellant adds that in the Suit Interim

Order is passed in favour of the present Appellants.

11. The Learned Counsel for Respondent No. 1 states that the Balance-sheets

of the Company for the last so many years shows the concerned Flat as the

property of the Corporate Debtor.

12. Having heard, Learned Counsel for both the sides, we do not find that only

because Mr. Uttam Chand Chauodhary was CA of the Corporate Debtor and

happens to be CA also of the Original Financial Creditor who filed Application

under Section 7 of the IBC, one can jump to a conclusion of collusion especially,

when nothing is shown that the said Uttam Chand Choudhary has any shares

or is Director of the Original Financial Creditor. Still, further material would be

required to be shown to claim collusion between the Said Financial Creditor and

the Directors of the Corporate Debtor. Merely on assumption, fraud can not be

said to have been prima facie indicated for the Adjudicating Authority to further

take cognizance of the averment made. When the property belongs to the

Company, (which the suit filed by Appellants itself shows) we do not find that

there was any sufficient cause for the Appellants to resist the Resolution

Professional when the Resolution Professional in discharge of duties under IBC

wanted to proceed against the property and take it over. Same is the position

with regard to the Liquidator.

13. The Learned Counsel for the Appellant is referring to the Judgment in the

matter of "Arcelormittal India Pvt. Ltd. vs. Satish Kumar Gupta and Others"

(2019) 2 SCC and referred to Para 86 and Para 116 to submit that considering

Company Appeal (AT) (Insolvency) No. 669 & 689 of 2019 6

the object of the provisions of IBC, efforts should be made to save the Company

and if there is a Resolution Applicant opportunity should be given to the

Resolution Applicant for submitting the Resolution Plan and effort should be

made to save the Company. The Learned Counsel states that the Appellant had

filed Application before the Adjudicating Authority to consider Appellants as

Resolution Applicants. It is stated that the Adjudicating Authority did not pass

orders even on that application. It appears to us that the Provisions of IBC

require that a prospective Resolution Applicant must approach the Resolution

Professional by filing expression of interest and then following the procedures of

IBC and the Regulations and complete compliances regarding the tendering of

the Resolution Plan. Nothing of this sought has admittedly been done. Without

moving Resolution Professional & CoC filing of application to Adjudicating

Authority is not the solution. The learned counsel for Appellant states that as

180 days were already over the Appellants could not follow this procedure. When

admittedly, the necessary procedure was not followed during the course of 'CIRP'

as required by the Provisions of IBC and the Regulations, such belated offer can

not be said to be bona fide. Merely expressing that I am ready to file Resolution

Plan is not sufficient for taking cognizance of such offer.

14. There is no substance in the claim of Appellants when it is stated that

Section 7 filed was collusive as no challenge to admission order was ever made.

Appellants have failed to show that the flat does not belong to the Company.

There are no bona fides in the claim that Appellants should be treated as

Resolution Applicants.

Company Appeal (AT) (Insolvency) No. 669 & 689 of 2019 7

15. Considering the facts of the present matter, we do not find that we have

any reason to interfere in the Impugned Order by which the Liquidation Orders

have been passed. There is no substance in the Appeal. The Appeal is dismissed.

[Justice A.I.S. Cheema] Member (Judicial)

[V.P. Singh] Member (Technical)

Basant B./md/

Company Appeal (AT) (Insolvency) No. 669 & 689 of 2019