Rajesh Toshniwal & Anr. & Ors vs Kamal Nayan Jain

IN THE MATTER OF: 1. RAJESH TOSHNIWAL a suspended director of the Corporate Debtor Swarna Mani, Flat 11EB, 33A Canal Circular Road, near Bengal Chemical, Kankurgachi, Kolkata-700054; Email id: tecpll@gmail.com ...Appellant No. 1 2. KUSUM TOSHNIWAL a suspended director of the Corporate Debtor Swarna Mani, Flat 11EB, 33A Canal Circular Road, near Bengal Chemical, Kankurgachi, Kolkata-700054; Email id: kamal@toshniwalcontrols.com ...Appellant No. 2 Versus

1. KAMAL NAYAN JAIN Erstwhile Liquidator of Toshniwal Enterprises Controls Limited 2/7, Sarat Bose Road, Vasundhara Building, 2nd Floor, Kolkata - 700020 Email id: knjain@knjainco.com ...Respondent No.1 2. UNION BANK OF INDIA SAMV Branch 8 Lenin Sarani, Kolkata- 700013 Email id: samvkolkata@unionbankofindia.bank amvkolkata@unionbankofindia.bank ...Respondent No.2 3. PUNJAB NATIONAL BANK Head Office: Plot No 4, Sector 10, Dwarka New Delhi-110075 Acting Through one of its Sastra Divison, Zonal office, United Tower, 3rd Floor, Hemanta Basu Sarani Kolkata- 700001 Email id:zs8350@pnb.co.in ...Respondent No.3 Present: For Appellant : Mr. Ajit Kumar Sinha, Sr. Advocate with Mr. S.K. Sharma, Advocate. For Respondent : Mr. Shaunak Mitra, Mr. Saikat Sarkar, Ms. Tanushree Paul, Mr. Ishan Choudhary Roy, Advocates for R-1. Mr. Kamal Nayan Jain, for R-1/Liquidator. Mr. Rajesh Kumar Gautam, Mr. Deepanjal Choudhary & Mr. Azal Ackram, Advocates for R-2 and 3.

JUDGMENT

(Hybrid Mode)

[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]

The instant appeal has been preferred by the appellants against the

impugned order dated 10.08.2023, passed in IA No. 1253/KB/2020 in CP

No. (IB) 1175/KB/2019 by the National Company Law Tribunal, Kolkata

Bench (Court-I) Kolkata (Tribunal) whereby the Ld. Adjudicating Authority

allowed an application filed by the Resolution Professional of the Corporate

Debtor (CD) under Section 43,44,66 and 60 (5) of the Insolvency and

Bankruptcy Code, 2016 (Code) and allowed all the prayers of the application

filed by the Resolution Professional except prayer 6 (f) and (g).

2. Brief facts necessary for disposal of this appeal are that on a petition

filed by the outlook Tracom Pvt. Ltd. under Section 7 of the Insolvency and

Bankruptcy Code, 2016 (Code) the Insolvency Process was initiated against

the Corporate Debtor (CD) vide order dated 22.11.2019 of the Ld.

Adjudicating Authority passed in CP No. (IB) 1175/KB/2019 and Mr. Kamal

Nayan Jain was appointed as Interim Resolution Professional (IRP), who was

subsequently confirmed as the Resolution Professional (RP).

Company Appeal (AT) (Ins) No. 1437 of 2023 2 of34

3. During the course of CIRP, the RP in the first meeting of the CoC held

on 19.12.2019 informed the members of the CoC that he would be taking

steps for filing of an application under Section 19 (2) of the Code against the

Suspended Directors of the CD, including the appellants as they are not

rendering any cooperation to him and thereafter an application bearing CA

IB No. 07/KB/2020 was filed by the RP under section 19 (2) of the Code

which was disposed of by the adjudicating authority on 16.01.2020 with a

direction to the suspended directors of the CD to cooperate with the RP and

to hand over all books of accounts, assets and other relevant documents of

the CD within three days failing which the RP was granted liberty to

approach the local police authorities for the purpose of taking assistance for

retrieval of the books of accounts of other relevant documents of the CD

from the suspended directors.

4. It is further reflected that in the 2nd meeting of the CoC held on

22.01.2020, the RP informed about the passing of the order and also about

the steps which would be taken in compliance of the said order. In the

meantime, appellant Rajesh Toshniwal has also requested the RP to grant

some more time for retrieval of the documents of Muchipara Police Station.

5. It is also evident that on 05.03.2020, the Ld. Adjudicating Authority

provided another opportunity to the suspended directors of the CD to

provide all necessary documents and the RP was directed to conduct a joint

visit on 05.03.2020, to the office of the CD along with the suspended

directors and a direction was also made to the Muchipara Police Station to

provide all necessary assistance to enable the RP to take soft copies of the

documents ceased by the Muchipara Police Station, in the presence of the

Company Appeal (AT) (Ins) No. 1437 of 2023 3 of34 suspended directors. Later on it is complained by the RP that appellant

Rajesh Toshniwal declined to accompany him to the Muchipara Police

Station and send his unauthorized representatives and thereafter none of

the suspended directors desires to accompany the RP Muchipara Police

Station for retrieval of the documents seized by the police and in this regard

the RP apprised the CoC in its 3rd CoC meeting held on 11.06.2020.

6. It is further reflected that the RP appointed M/s S. Poddar and

Company as transaction auditor and an interim transaction report was

prepared by the transaction auditor wherein several questionable

transactions surfaced. In the meantime, the RP also stated to have

approached the magistrate on 10.11.2020, for issuance of appropriate

directions to the Muchipara Police Station for the purpose of providing all

necessary facilities and assistance to the RP.

7. It is also reflected that the discussion pertaining to the interim

transaction audit report was held in the 4th meeting of the CoC held on

02.09.2020, and in pursuance of the decision taken therein the interim

transaction audit report was shared with the suspended directors in order to

solicit their response pertaining to some objectionable transactions.

However, no explanation was submitted by the suspended directors and

thereafter on 25.09.2020, the transaction auditor prepared the final

transaction audit report on the basis of the information and documents

retrieved from public domain or from the CD and also on the basis of

information/documents collected from third party.

8. It is also evident that the RP considered the final transaction audit

report and being satisfied that there are certain transactions which are

Company Appeal (AT) (Ins) No. 1437 of 2023 4 of34 preferential and fraudulent in nature and in pursuance of the decision

taken in the 5th CoC meeting held on 06.10.2020, filed the IA 1253/

KB/2020 which has been disposed of by Ld. adjudicating authority by

passing the impugned order where by all the prayers of the application has

been allowed except prayer (f) and (g).

9. It is also to be recalled that during the pendency of the aforesaid

application moved by the Resolution Professional the CoC in its 17th meeting

held on 18.01.2022 rejected the resolution plan submitted by one resolution

applicant and approved the decision to liquidate the CD and accordingly,

vide order dated 04.04.2022, an application bearing IA No. 142/KB/2022

filed under Section 33 of the Code was allowed by Ld. Adjudicating Authority

and liquidation proceedings were initiated and thereafter on 02.08.2023, the

liquidator convened the meeting of stakeholders committee and assign the

outcome of the IA No. 1253/KB/2020 to Respondent No. 2 and 3 i.e. Union

Bank of India and Punjab National Bank and ultimately on 24.01.2023, the

CD was sold as a going concern to M/s Candid Resources Ltd.

10. It is also pertinent to mention here that before the Ld. Adjudicating

Authority the Respondents in the application including the appellants were

served however, the reply was filed only by Respondents Rajesh Toshniwal

and Ms. Kusum Toshniwal- (Appellants) and the proceedings were initiated

ex-parte against rest of the Respondents and even thereafter, when the

matter was listed for final consideration/ hearing by Ld. Adjudicating

Authority on 31.08.2022 the contesting Respondents sought some more

time to advance their arguments and their prayer was allowed at the cost of

Rs. 20,000/- and when the matter was again taken up on 23.09.2022 there

Company Appeal (AT) (Ins) No. 1437 of 2023 5 of34 was no representation on behalf of Respondents however, the matter was

again adjourned by the Ld Adjudicating Authority to 26.10.2022 whereon

the Ld. Adjudicating Authority recorded that if its earlier directions were not

complied, necessary orders would be passed and the matter was again

posted for 23.11.2022. It is also recorded by Ld. Adjudicating Authority in

the impugned order that on 23.11.2022, there was again no representation

on behalf of the Respondent Nos. 1 and 2 (Appellants) and the matter was

argued by Ld. Counsel for the RP and the same was reserved for judgment.

11. Ld. Counsel for the appellant submits that entire controversy arises

from a Defective and Assumption based Transaction Audit Report filed by

the S. Poddar & Co., Chartered Accountants, which is totally based on

Presumptions and assumptions and not on the basis of documents and the

Transaction Audit Report itself acknowledges its speculative basis stating

that all audited financial statements of the Corporate Debtor submitted to

the Transaction Auditor obtained by it from the sources mentioned in the

report are taken as true and correct reflection of facts. Thus the report has

been submitted only on the basis of presumptions. That all documents

collected by transaction auditor are truthful. Therefore, the basis on which

satisfaction of the RP has arrived is itself doubtful.

12. It is further submitted that the Transaction Auditor was not provided

with the requisite documents by the Resolution Professional (RP) and thus

he failed to discharge his duty as specified under Section 25 (l)& (2) of the

Code and Rules specified thereunder and he has also not taken any steps

for obtaining the documents which were seized by the Police, even after

specific directions from the Ld. NCLT, Kolkata vide Order dated 05.03.2020 Company Appeal (AT) (Ins) No. 1437 of 2023 6 of34 whereby the SHO, Muchipara P.S. was also directed to provide all necessary

facilities/assistances so that the Resolution Professional in the presence of

the suspended Director can extract soft copy from the laptop kept in the

custody of police. The RP also failed to file any application before the

concerned Magistrate to obtain permission to access the seized documents,

thereby depriving the Transaction Auditor of necessary record for a fair,

unbiased, and reliable Transaction audit.

13. It is further submitted that Transaction Auditors in their report have

indicated that they have not been provided with the necessary documents

which can enable them to look into the financial transactions of the

corporate debtor or the alleged related parties and thus the Transaction

Audit Report was prepared without necessary documents, which ought to

have been provided by the RP to get the accurate Transaction Audit Report.

14. It is further submitted that the Prayer clause in Para 6 of IA No. 1253

of 2020 filed before the Ld. NCLT, Kolkata is patently defective whereby the

prayer has been made to pass an order directing Respondent No. 1, Mr.

Rajesh Toshniwal (Appellant) to pay Rs. 9,27,028.00 (Rupees Nine Lakh

Twenty-Seven Thousand and Twenty-Eight only) in the account of the

Corporate Debtor, while the alleged preferential transactions pertaining to

Appellant No. 1 amounting to Rs. 9,27,028/- which comes from two Bank

accounts of the Corporate Debtor i.e. OBC (Rs. 1,10,000) and Corporation

Bank (Rs. 8,17,028), wherein an amount of Rs. 1,57,028 of some other

person in the name of Mr. Rajesh Kumar has also been included. Moreover

Mr. Rajesh Toshniwal was the director of the Corporate Debtor before

Company Appeal (AT) (Ins) No. 1437 of 2023 7 of34 initiation of the CIRP and transactions related to him cannot be treated as a

preferential transaction as these were legitimate payments made to him in

his capacity as a Director of the Corporate Debtor, towards salary and

routine business expenses.

15. It is further submitted that the Resolution Professional in Prayer 6 (b)

of the application it was requested to pass an order directing Respondent

N0. 6, Toshniwal Enterprises represented by Mr. Rajesh Toshniwal in his

capacity as the son and heir apparent of the erstwhile proprietor, Late

Kamal Kishore Toshniwal to pay Rs. 71,82, 600/- (Rupees Seventy-One

Lakhs Eighty-Two Thousand and Six Hundred only) in the account of the

Corporate Debtor and thus the Resolution Professional has committed an

illegality in considering the appellant as the only legal representative of M/s

Toshniwal Enterprises on the sole ground that he is the son and heir of Late

Kamal Kishore Toshniwal. It is submitted that Appellant No. l has neither

inherited any part of the estate of Late Kamal Kishore Toshniwal nor has he

assumed or accepted any responsibility or liability in respect of the said sole

proprietorship concern. It is also highlighted that the said Late Kamal

Kishore Toshniwal is survived by one son i.e. Appellant No. 1 and two

daughters, all of whom are independent individuals and have no connection

with the affairs of the said concern. Hence, the unilateral attribution of

responsibility upon Appellant No. l is wholly misconceived and baseless.

16. It is also submitted that the Resolution Professional in Prayer 6 (c) of

the application prayed for passing an order directing Respondent No. 7, M/s

Holdwell TradecomPvt. Ltd. to pay Rs. 1,12,000/- (Rupees One Lakh Twelve

Thousand only) in the account of the Corporate Debtor. However the Company Appeal (AT) (Ins) No. 1437 of 2023 8 of34 Resolution Professional, while computing the amount referred to in Prayer

6(c), has selectively relied upon the figure reflected under the column titled

"Amount Debited", while deliberately and/or negligently omitting to account

for the corresponding entry under the column "Amount Credited", thus

conduct of the Resolution Professional, in suppressing material credits while

projecting a distorted debit balance, is in clear violation of the standards of

integrity, objectivity, and care mandated under Section 208 of the

Insolvency and Bankruptcy Code, 2016.

17. It is also highlighted that the Resolution Professional in Prayer 6 (d)

requested to pass an order directing Respondent No. 8, M/s Nandlal Kamal

Kishore Vyapaar Pvt. Ltd. to pay Rs. 3,70,59,000/- (Rupees Three Crores

Seventy Lakhs Fifty-Nine Thousand only) and while computing the amount

"referred to in Prayer 6(c), taken from OBC Bank for Rs. 28,20,000/- and

Corporation Bank for Rs. 88,59,000, RP has selectively relied upon the

figure reflected under the column titled "Amount Debited", while deliberately

and/or negligently omitting to account for the corresponding entry under

the column "Amount Credited". Had the Resolution Professional exercised

due diligence and deducted the credited sum of Rs. 85,00,000/-, as

mandatorily required, the resultant Net Debit Balance would have been only

Rs. 3,59,000/-. The aforesaid acts and omissions unmistakably

demonstrate misconduct and raise serious doubts about the ability,

impartiality, and professional fitness of the Respondent Resolution

Professional to handle the present insolvency process, thereby warranting

strict scrutiny and appropriate directions by this Appellate Tribunal.

Similarly, in Prayer 6 (e) request was made with regard to Respondent No. l

Company Appeal (AT) (Ins) No. 1437 of 2023 9 of34 to 4 to pay jointly or severally a sum of Rs. 7,19,07,638. 00 (Rupees Seven

Crore Forty-Nine Lakh Seven Thousand Six Hundred and Thirty-Eight only)

or any other amount as this Appellate Tribunal may deem fit on account of

payments made to related parties from the accounts of the Corporate

Debtor. The Resolution Professional by sheer negligence appears to have

calculated the amount as mentioned in the Prayer 6 (e) separately as well as

collectively in the present prayer which can be seen by adding the amounts

mentioned in Prayer clause 6(a) i.e. Rs. 9,27,028/- + (b) i.e. Rs. 7l,82,600/-

+ (c) i.e. Rs. 1,12,000/- + (d) i.e. Rs. 1,l6,79,000/- + (f) i.e. Rs. 7,30,000/-

and (g) i.e. Rs. 5,42,77,0l0/- = (e) Rs. 7,49,07,638/-. This calculation made

by the Resolution Professional shows his incapability, unprofessionalism

and incompetency in dealing the present matter.

18. It is further submitted that the Resolution Professional has

committed similar mistakes so far as the prayers with regard to Mr. Raghav

Toshniwal Limited for an amount of Rs. 7,30,000/- and Digital Live Ads

Limited for an amount of Rs. 5,42,77,010/- is concerned, which have not

been allowed by the Adjudicating Authority. The RP has not challenged the

rejection of Prayer 6 (f) and (g) refused vide impugned order. It is therefore

evident that the Resolution Professional has failed to clearly segregate and

articulate the reliefs sought, thereby inflating the total claim multiple times.

This reflects a serious failure of due diligence on the part of the Resolution

Professional, as well as an oversight by Ld. Adjudicating Authority in not

identifying such duplication and inflation.

19. It is further submitted that the Resolution Professional has ignored

the Disclaimers/ and Limitation Clause of the Transaction Audit Report and

Company Appeal (AT) (Ins) No. 1437 of 2023 10 of34 without application of mind filed the application alleging preferential and

fraudulent transactions against the appellant and suspended board of

directors. The Resolution Professional instead of providing the necessary

documents to the Auditor, had filed the Application on basis of the

incomplete and unreliable Transaction Auditor Report given by the Auditor

and the impugned order based on such report is liable to be set aside.

20. Ld. Counsel for the Respondent No. 1 on the other hand submits that

an application was filed under Section 7 IBC by M/s. Outlook Tradecom Pvt.

Ltd., which was admitted on 29.11.2019, thereby initiating corporate

insolvency resolution process (CIRP) against the CD and Respondent No.1

was appointed as the Interim Resolution Professional and subsequently as

the Resolution Professional of the CD. During the CIRP, the suspended

Directors including the Appellants did not render any co-operation to the RP

and their non-cooperation was intimated to the Committee of Creditors

(CoC) in the 1st CoC Meeting held on 19.12.20195. Thereafter an application

i.e., CA (IB) No. 07/KB/2020 was filed under Section 19(2) of the Code,

which was allowed on 16.01.20207 with the direction to the suspended

Directors of the CD, including the Appellants, to co-operate and hand over

all books of accounts, assets and other relevant documents of the CD to the

R1 within 3 days, failing which the R1 was granted liberty to approach the

local police authority to take assistance for retrieval of the books of

accounts, assets and other relevant documents of the CD from the

suspended Directors, including the Appellant.

21. It is further submitted that on 23.01.2020 Appellant No. 1 i.e., Mr.

Rajesh Toshniwal requested RP to grant further time to provide the

Company Appeal (AT) (Ins) No. 1437 of 2023 11 of34 remaining documents since the same was required to be retrieved from

Muchipara PS as their mail system had been suspended due to non-

payment, however the suspended Directors, including the Appellants did not

provide the remaining documents as was requested by RP and it was on

05.03.2020 Ld. Tribunal granted another opportunity to the suspended

Directors of the CD, including the Appellants, to co-operate with RP by

providing all necessary documents and for that purpose, RP was directed to

conduct a joint visit, on 05.03.2020 itself, with the suspended Directors of

the CD to the office of the CD and take inventory of available documents

jointly in presence of the suspended Directors of the CD. The Tribunal also

directed the Muchipara PS to provide all necessary facilities / assistance in

order to enable the RP to take soft copies of the documents seized by the

Muchipara PS, in the presence of the suspended Directors, with the

permission from the concerned Magistrate.

22. It is further submitted that on 05.03.2020, RP requested Appellant

No. 1 ,Mr. Rajesh Toshniwal to accompany to the Muchipara PS, however,

he refused to accompany to the Muchipara PS stating that the copy of the

order dated 05.03.2020 was not available and inspite of the order dated

05.03.2020 being made available to Appellant in the evening of 05.03.2020,

he refused to accompany RP to Muchipara PS and send his unauthorized

representative to the Muchipara PS despite the categorical direction in the

order dated 05.03.2020 for Appellant to accompany RP to the Muchipara PS

and thereafter, despite repeated requests form RP, none of the suspended

Directors, including the Appellants, expressed any desire to accompany the

RP to the Muchipara PS for retrieval of the seized CD records.

Company Appeal (AT) (Ins) No. 1437 of 2023 12 of34

23. It is also submitted that in the 3rd CoC Meeting held on 11.06.2020,

RP appraised the CoC about the continued non-cooperation by the

suspended Directors of the CD and appointment of M/s. S. Poddar & Co., to

conduct a forensic / transaction audit of the CD. On 19.05.2020, the M/s.

S. Poddar & Co., (Transaction Auditor / TA) issued an Interim Transaction

Report (TAR) wherein the it was opined that there were several questionable

transactions carried out by the CD with its related parties.

24. It is further submitted that in the meantime, due to the continued

non-cooperation by the suspended Directors of the CD, including the

Appellants, RP approached the concerned Magistrate, independently, on

10.11.2020, inter alia seeking for issuance of a direction to the Muchipara

PS to provide all necessary facilities/assistance to the RP to extract soft

copies of the seized CD documents. In the 4th CoC Meeting held on

02.09.202020, RP appraised the CoC about the continued non-cooperation

by the suspended Directors and the information retrieved from the Officer-

in-Charge of Muchipara PS and the advocate of A1. As per the decision

taken in the 4th CoC Meeting held on 02.09.2020 the RP shared the interim

TAR with the suspended Directors, including the Appellants, in order to

solicit their response to the questionable transactions identified by the TA,

however no information/documents/explanation was put forth by the

suspended Directors of the CD and thereafter on 25.09.202025, the Final

transaction Audit Report was prepared on the basis of the information/

documents available in public domain or with the CD and upon perusal and

assessment of the Audit report RP formed an independent opinion that

certain impugned transactions identified in the Final TAR were preferential

Company Appeal (AT) (Ins) No. 1437 of 2023 13 of34 and fraudulent in nature and in pursuance of the decision taken in the

meeting of the COC on 06.10.2020 the application was filed.

25. It is further submitted that there is an independent application of

mind by RP in filing the application and the alleged preferential transactions

took place within the relevant time prescribed by the Code, however, no

evidence has been produced to establish that these transactions took place

in the ordinary course of business and all transactions which have been

labelled as preferential were made to the related entities in order to deprive

the other creditors of the CD and therefore the beneficiaries of these

transactions have been rightly asked to contribute the benefit derived to the

CD. Appellants have miserably failed to discharge the burden / onus under

Section 43(3) of the Code to show that the impugned transactions were in

the ordinary course of business. Mere bald assertion of "ordinary course"

without documents cannot rebut statutory presumption.

26. It is also submitted that the plea advanced by the Appellants that the

records were seized by the Muchipara PS is a self-serving excuse. The

Appellants deliberately avoided participation in the process of retrieval of

information / documents seized by the Muchipara PS, thereby disentitling

the Appellants from claiming prejudice in any manner whatsoever.

27. It is further submitted that Appellants attempting to espouse the case

of non-contesting parties without any documentary support and they cannot

be permitted to do so and the typo error in the figure mentioned in prayer (d)

sought in IA 1253 was categorically pointed out by RP and the same is also

recorded in Para 6.5 of the Impugned Order and categorically noted in Para

21 of the Impugned Order. The typo error in the figure mentioned in prayer

Company Appeal (AT) (Ins) No. 1437 of 2023 14 of34

(d) sought in IA 1253 pertains to a party who is not in appeal and RP at the

time of filing IA 1253 had not contemplated that prayer (f) and (g) sought in

IA 1253 would not be granted by the Adjudicating Authority. Since the

reliefs sought in IA 1253 was partly allowed, thereby there is automatic

adjustment of the figures wrongly mentioned in the prayers of IA 1253 and

Notwithstanding the above, this Appellate Tribunal is fully empowered to

correct such inadvertent error and the Appellants cannot be allowed to take

advantage of any error in the Impugned Order, which has occurred

inadvertently. It is also submitted that the relief sought by RP in paragraph

6(d) of IA 1253 is only granted to the extent of Rs. 1,16,79,000/-.

28. Having heard Ld. Counsel for the parties and having perused the

record including the written submissions filed by the parties, it is reflected

that application bearing IA no. 1253/KB/2020 was filed by the

Respondent/Resolution Professional for grant of following prayers:

"(a)That this Adjudicating Authority be pleased to pass an order directing Respondent No. 1 Mr. Rajesh Toshniwal to pay Rs. 9,27,028/- in the account of the account of the Corporate Debtor;

(b) That this Adjudicating Authority be pleased to pass an order directing Respondent No. 6. Toshniwal Enterprises, represented by Mr. Rajesh Toshniwal in his capacity as the son and heir apparent of the erstwhile proprietor, Late Kamal Kishore Toshniwal to pay Rs. 71,82,600/- in the account of the account of the Corporate Debtor;

(c) That this Adjudicating Authority be pleased to pass an order directing Respondent No. 7. M/s Holdwell Tradecom Pvt. Ltd. to pay Rs. 1,12,000/- in the account of the account of the Corporate Debtor;

(d) That this Adjudicating Authority be pleased to pass an order directing Respondent no. 8 M/s Nandlal Kamal Kishore Vyapaar Pvt. Ltd. to pay Rs. 1,16,79,000/- in the account of the account of the Corporate Debtor;

(e) That this Adjudicating Authority be pleased to pass an order directing the suspended board of directors being

Company Appeal (AT) (Ins) No. 1437 of 2023 15 of34 Respondent No. 1 to 4 to pay jointly or severally a sum of Rs. 7,49,07,638/- of any other amount as this Adjudicating Authority may deem fit on account of payments made to related parties from the accounts of the Corporate Debtor.

(f) That this Adjudicating Authority be pleased to pass an order directing Respondent No. 5 to contribute a sum of Rs.

7,30,000/- or such other sum as this Adjudicating Authority may deem fit;

(g) That this Adjudicating Authority be pleased to pass an order directing Respondent No. 9 to contribute a sum of Rs. 5,42,77,010/- or such other sum as this Adjudicating Authority may deem fit;

(h) That this Adjudicating Authority be pleased to pass an order directing the suspended board of directors being Respondents No. 1 to 5 to make such contributions to the assets of the corporate debtor as this Adjudicating Authority may deem fit;

(i) That this Adjudicating Authority may be pleased to pass an order or orders as may be deemed necessary for investigation into the affairs of the corporate debtor;

(j) For such further and other reliefs as this Adjudicating Authority may deem fit and proper in the facts and circumstances of this case".

29. It is also evident that by passing the impugned order Ld. Adjudicating

Authority did not find sufficient evidence to grant prayers 6 (f) and (g) of the

application and as such the reliefs sought in paragraph 6 (f) and (g) were not

granted while the other prayers of the application were granted with a

clarification that the relief sought by the applicant in paragraph 6(d) of the

application was granted to the extent of Rs. 1,16,79,000/-.

30. We also notice that the Resolution Professional on the basis of

transaction audit report has made up his mind and being satisfied by the

conclusions drawn therein, has filed the application before Ld. Adjudicating

Authority. The said Transaction Audit Report has been placed on record. Ld.

Counsel for the appellant has criticized this Transaction Audit Report on the

basis that the same has been prepared without any genuine documentary

evidence and the required documentary evidence was not produced by the

Company Appeal (AT) (Ins) No. 1437 of 2023 16 of34 Resolution Professional before the Transaction Auditor and therefore, this

report could not be made the basis of holding any transaction as either

related or preferential.

31. We have perused the Transaction Audit Report prepared by the

Transaction Auditors i.e. S. Poddar and company/ Chartered Accountants

and while preparing the Report the Transaction Auditors appears to have

performed diligent exercise in ascertaining the necessary information about

the CD and have taken the period of the audit as two years prior to the CIRP

date i.e. 22.11.2019 and categorically recorded the names of the Directors of

the CD as on 04.03.2020 as well as the shareholders of the Company as on

31.03.2018 and also collected information with regard to the subsidiary as

well as foreign subsidiary and associate company of the CD.

32. The perusal of this transaction audit report would further reveal that

the auditor has earmarked various entities and persons as related parties in

view of Section 5(24) and 24 (A) of the Code. It is also mentioned in the

report that the corporate debtor has not provided the books of accounts and

in this regard an application was filed by the RP under Section 19 (2) of the

Code which was disposed of by the Ld. Adjudicating Authority by passing

certain directions and thus in absence of these documentary evidence it is

recorded in the report that the Transaction Audit Report is based on the

restricted information which was made available by the RP and collected

from third party sources.

33. It is further reflected from the Transaction Audit Report that for

preparation of the report the bank statement of the CD of the relevant

period, list of debtors, claims submitted by the creditors list of assets seized

Company Appeal (AT) (Ins) No. 1437 of 2023 17 of34 of by the police, and audited balance sheet for March 2016 of Toshniwal

Enterprises Controls PTE Ltd. (Company based in Singapore) and unaudited

balance sheet provided by the corporate assurance PAC and TECPL,

multiple ledgers retrieved vide email correspondence with corporate

assurance PAC and Public Accountants and Chartered Accountant

(Singapore Auditor) dated 28.02.2020 were taken into cognizance and

thereafter certain transactions were highlighted by the transaction auditor

as preferential transactions.

34. Having perused the report prepared by the Transaction Auditors we

are satisfied that cautious and diligent exercise has been done by the

Transaction Auditors. So far as the objections raised by the appellants with

regard to the insufficiency of the material available with the Transaction

Auditors and various disclaimers given by the Transaction Auditors in their

report, is concerned the same in our considered opinion are not sufficient to

discard the otherwise diligent report prepared by the transaction auditor.

35. It is also to be recalled that since beginning of the CIRP, the

suspended directors of the CD were non-cooperative with the IRP/RP and it

is also evident from the record that they did not provide relevant

documentary evidence to the IRP/RP and even did not make any effort to

retrieve the data contained in the laptops seized by the police and therefore,

in this background the RP was constrained to provide the documents which

he could collect from the banks and other third parties. Since, the

Suspended Directors of the CD including the appellants were at fault, in not

providing the documents/financial statement of the CD to the IRP/RP, they

cannot take this defense that the material available with the Transaction

Company Appeal (AT) (Ins) No. 1437 of 2023 18 of34 Auditors was not sufficient. Before the Ld. Tribunal as well as in the memo

of appeal preferred before us we have not found any fact by which the

appellants have justified the transactions highlighted by the Transaction

Auditor.

36. So far as the submission of Ld. Counsel for the appellant with regard

to the defective prayers of the application moved by the RP is concerned, it is

reflected that in the prayer clause 6 (a) reliefs have been claimed and

granted by Ld. Adjudicating Authority pertaining to the amount of Rs.

9,27,028/- to be paid by Appellant No. 1. The Transaction Auditors in their

report has stated that appellant no. 1 has taken Rs. 110,000/- from the

bank account of the CD lying in OBC Bank and Rs. 817,028/- were paid to

him from the corporation bank account of the CD. These entries noted by

the transaction auditor are based on the bank account statements of the CD

lying in aforesaid two banks and no acceptable explanation has been given

by the appellant either before this appellate tribunal or before ld.

Adjudicating authority pertaining to the justification of the payment of this

amount. Therefore, the conclusions drawn by the adjudicating authority

with regard to this amount requires no intervention by us.

37. Prayer 6(b) of the application moved by the RP is with regard to the

payment of Rs. 71,82,600/- by Toshniwal Enterprises and this prayer has

also been granted by the Adjudicating Authority by passing the impugned

order. Ld. Counsel for the appellants has contended that the liability of this

amount could not be fastened only on appellant no. 1 as, there are other

legal heirs of late Kamal Kishore Toshniwal i.e. two daughters and none of

Company Appeal (AT) (Ins) No. 1437 of 2023 19 of34 them was having any connection with the sole proprietorship owned by late

Kamal Kishore Toshniwal.

38. We find that the figure of Rs. 71,82,600/- has been ascertained by the

transaction auditor on the basis of bank statements of the CD and it has

also been highlighted by the auditor that huge amount has been paid to

related parties from the bank account of the CD lying in OBC Bank as well

as Corporation Bank, within few days of the receipt of the same. Thus, in

our considered opinion the entries in the transaction audit report is based

on the bank account statement of the CD and moreover this amount and

entries have not been disputed by the appellant and the sole objection which

has been raised, is that the appellant no. 1 alone is not liable, nor any other

legal heir of late Kamal Kishore Toshniwal is responsible, as they were not

having any connection with the sole proprietorship owned by the deceased.

39. It appears to be an admitted fact that M/s Toshniwal Enterprises was

a party before Ld. Adjudicating Authority and it chooses not to contest the

application before it and proceedings were drawn ex-parte against it and no

appeal has either been filed by the aforesaid entity.

40. It is also to be recalled that in the application moved by the RP before

the Ld. Adjudicating Authority it has been stated that payment of Rs.

7182600/- was made to the proprietorship firm of Mr Kamal Kishore

Toshniwal who was arrayed as Respondent No.6 to the application and also

that when RP was made aware of the death of him on 19.10.2020 by the

Appellant No.1, who is the son of the deceased.

41. It is further stated in that application that vide email dated

28.10.2020 Appellant No.1 stated that they have not received the requisite

Company Appeal (AT) (Ins) No. 1437 of 2023 20 of34 certificate from the Court and on this the applicant arrayed the appellant

No.1 as the representative of the said proprietorship concern in his capacity

as the son and heir apparent of the deceased proprietor Late Kamal Kishore

Toshniwal.

42. Perusal of the application would further reveal that in paragraph No. 6

of the application the RP has detailed the preferential transactions and in

sub paragraph (ii) of the same, the above transaction has been labeled as

preferential. It is also reflected that in sub paragraph (p) of the paragraph

No. 6, the RP has detailed the fraudulent transactions. The transaction

auditor in his report also placed this transaction under the heading of

Preferential Transaction under Section 43 of the Code.

43. Ld. Adjudicating Authority in the impugned judgment has also placed

aforesaid transaction under the heading "Preferential Transaction" and while

citing GVR Consulting Services Pvt. Ltd. and Ors. vs Pooja Bahry and

Ors., MANU/NL/0371/2023 (NCLAT) opined that the intent of the

Corporate Debtor is not relevant under Section 43 of the Code, since Section

43 envisages statutory fiction. Thus it is crystal clear that the above

mentioned transaction was clearly stated to be a preferential transaction by

the RP in his application and adjudicated as such by the Adjudicating

Authority by passing the impugned Judgment.

44. It is in the background of the aforesaid facts, this argument of the

appellants is to be appreciated that the appellant being the Director of the

CD may not be directed to pay the amount of preferential transactions

allegedly made to the proprietorship firm of deceased Kamal Kishore

Toshniwal as they were not having any connection with the Toshniwal

Company Appeal (AT) (Ins) No. 1437 of 2023 21 of34 Enterprises, the sole proprietorship owned by the deceased Kamal Kishore

Toshniwal (Deceased Father of the Appellants).

45. Section 43 and 44 of the Code are relevant for the controversy at hand

and are reproduced as under; -

"Section 43. (1) Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44.

(2) A corporate debtor shall be deemed to have given a preference, if--

(a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and

(b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53.

(3) For the purposes of sub-section (2), a preference shall not include the following transfers--

(a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee;

(b) any transfer creating a security interest in property acquired by the corporate debtor to the extent that--

(i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest and was used by corporate debtor to acquire such property; and

(ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property:

Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor.

Explanation. --For the purpose of sub-section (3) of this section, "new value" means money or its worth in goods, Company Appeal (AT) (Ins) No. 1437 of 2023 22 of34 services, or new credit, or release by the transferee of property previously transferred to such transferee in a transaction that is neither void nor voidable by the liquidator or the resolution professional under this Code, including proceeds of such property, but does not include a financial debt or operational debt substituted for existing financial debt or operational debt.

(4) A preference shall be deemed to be given at a relevant time, if--

(a) it is given to a related party (other than by reason only of being an employee), during the period of two years preceding the insolvency commencement date; or

(b) a preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date.

"Section 44. Orders in case of preferential transactions. - The Adjudicating Authority, may, on an application made by the resolution professional or liquidator under sub- section (1) of section 43, by an order:

(a) require any property transferred in connection with the giving of the preference to be vested in the corporate debtor;

(b) require any property to be so vested if it represents the application either of the proceeds of sale of property so transferred or of money so transferred;

(c) release or discharge (in whole or in part) of any security interest created by the corporate debtor;

(d) require any person to pay such sums in respect of benefits received by him from the corporate debtor, such sums to the liquidator or the resolution professional, as the Adjudicating Authority may direct;

(e) direct any guarantor, whose financial debts or operational debts owed to any person were released or discharged (in whole or in part) by the giving of the preference, to be under such new or revived financial debts or operational debts to that person as the Adjudicating Authority deems appropriate;

(f) direct for providing security or charge on any property for the discharge of any financial debt or operational debt under the order, and such security or charge to have the same priority as a security or charge released or discharged wholly or in part by the giving of the preference; and

(g) direct for providing the extent to which any person whose property is so vested in the corporate debtor, or on whom financial debts or operational debts are imposed by the order, are to be proved in the liquidation or the corporate insolvency resolution process for financial debts Company Appeal (AT) (Ins) No. 1437 of 2023 23 of34 or operational debts which arose from, or were released or discharged wholly or in part by the giving of the preference:

Provided that an order under this section shall not--

(a) affect any interest in property which was acquired from a person other than the corporate debtor or any interest derived from such interest and was acquired in good faith and for value;

(b) require a person, who received a benefit from the preferential transaction in good faith and for value to pay a sum to the liquidator or the resolution professional.

Explanation I.--For the purpose of this section, it is clarified that where a person, who has acquired an interest in property from another person other than the corporate debtor, or who has received a benefit from the preference or such another person to whom the corporate debtor gave the preference, --

(i) had sufficient information of the initiation or commencement of insolvency resolution process of the corporate debtor;

(ii) is a related party, it shall be presumed that the interest was acquired or the benefit was received otherwise than in good faith unless the contrary is shown.

Explanation II. --A person shall be deemed to have sufficient information or opportunity to avail such information if a public announcement regarding the corporate insolvency resolution process has been made under section 13."

46. Hon'ble Supreme Court in Anuj Jain v. Axis Bank Limited (2020) 8

SCC 401 has laid down the guiding principles to identify preferential

transactions and the relevant part of the same is reproduced as under:

"Analysing Section 43 of the Code

18. In the backdrop of the foregoing, we may now scrutinize Sections 43 and 44 of the Code. Section 44 provides for the consequences of an 64 offending35 preferential transaction i.e., when the preference is given at a relevant time. Under Section 44, the Adjudicating Authority may pass such orders as to reverse the effect of an offending preferential transaction. Amongst others, the Adjudicating Authority may require any property transferred in connection with giving of preference to be

Company Appeal (AT) (Ins) No. 1437 of 2023 24 of34 vested in the corporate debtor; it may also release or discharge (wholly or in part) any security interest created by the corporate debtor. The consequences of offending preferential transaction are, obviously, drastic and practically operate towards annulling the effect of such transaction. Looking to the contents, context and consequences, we are at one with the contentions urged on behalf of the respondents with reference to the decisions in Devinder Singh (supra) and other cited cases, that these provisions need to be strictly construed. However, even if we proceed on strict construction of Section 43 of the Code, the underlying principles and the object cannot be lost sight of. In other words, the construction has to be such that leads towards achieving the object of these provisions. 18.1. Looking at the broad features of Section 43 of the Code, it is noticed that as per sub-section (1) thereof, when the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has, at a relevant time, given a preference in such transactions and in such manner as specified in sub- section (2), to any person/persons as referred to in 35 Note: Here the expression 'offending' is only to denote the unacceptability of such transaction and not any criminality. 65 sub-section (4), he is required to apply to the Adjudicating Authority for avoidance of preferential transactions and for one or more of the orders referred to in Section 44. If twin conditions specified in sub-section (2) of Section 43 are satisfied, the transaction would be deemed to be of preference. As per clause (a) of sub-section (2) of Section 43, the transaction, of transfer of property or an interest thereof of the corporate debtor, ought to be for the benefit36 of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and as per clause (b) thereof, such transfer ought to be of the effect of putting such creditor or surety or guarantor in beneficial position than it would have been in the event of distribution of assets under Section 53.

18.2. However, merely giving of the preference and putting the beneficiary in a better position is not enough. For a preference to become an offending one for the purpose of Section 43 of the Code, another essential and rather prime requirement is to be satisfied that such event, of giving preference, ought to have happened within and during the specified time, referred to as "relevant time". The relevant time is reckoned, as per sub-section (4) of Section 43 of the Code, in two ways: (a) if the preference is given to a related party (other than an employee), the relevant time is a period of two years preceding the insolvency Company Appeal (AT) (Ins) No. 1437 of 2023 25 of34 commencement date; and (b) if the preference is given to a person other than a related party, the relevant time is a period of one year preceding such commencement date. In other words, for a transaction to fall within the mischief sought to be remedied by Sections 43 and 44 of the Code, it ought to be a preferential one answering to the requirements of sub-section (2) of Section 43; and the preference ought to have been given at a relevant time, as specified in sub-section (4) of Section 43.

Indicting parts - deemed preference at a relevant time

19. In order to understand and imbibe the provisions concerning preference at a relevant time, it is necessary to notice that as per the charging parts of Section 43 of the Code i.e., sub-sections (4) and (2) thereof, a corporate debtor shall be deemed to have given preference at a relevant time if the twin requirements of clauses (a) and (b) of sub-section (2) coupled with the applicable requirements of either clause (a) or clause (b) of sub-section (4), as the case may be, are satisfied.

19.1. To put it more explicit, the sum total of sub-sections (2) and (4) is that a corporate debtor shall be deemed to have given a preference at a relevant time if: (i) the transaction is of transfer of property or the interest thereof of the corporate debtor, for the benefit of a creditor or surety or guarantor for or on account of an antecedent financial debt or operational debt or other liability; (ii) such transfer has the effect of putting such creditor or surety or guarantor in a beneficial position than it would have been in the event of distribution of assets in accordance with Section 53; and (iii) preference is given, either during the period of two years preceding the insolvency commencement date when the beneficiary is a related party (other than an employee), or during the period of one year preceding the insolvency commencement date when the beneficiary is an unrelated party.

19.2. By way of these statutory provisions, legal fictions are created whereby preference is deemed to have been given; and is deemed to have been given at a relevant time, if the stated requirements are satisfied.

19.3. On a conspectus of the principles so enunciated, it is clear that although the word 'deemed' is employed for different purposes in different contexts but one of its principal purpose, in essence, is to deem what may or may not be in reality, thereby requiring the subject-matter to be treated as if real. Applying the principles to the provision at hand i.e., Section 43 of the Code, it could reasonably be concluded that any transaction that answers to the descriptions contained in sub-sections (4) and (2) is presumed to be a preferential transaction at a relevant

Company Appeal (AT) (Ins) No. 1437 of 2023 26 of34 time, even though it may not be so in reality. In other words, since sub-sections (4) and (2) are deeming provisions, upon existence of the ingredients stated therein, the legal fiction would come into play; and such transaction entered into by a corporate debtor would be regarded as preferential transaction with the attendant consequences as per Section 44 of the Code, irrespective whether the transaction was in fact intended or even anticipated to be so."

47. We have already noticed that findings recorded by the Adjudicating

Authority with regard to the aforesaid transaction are in terms that

erstwhile management has executed this preferential transaction in favour

of a related party i.e. "Toshniwal Enterprises" owned by the father of the

appellants (deceased Kamal Kishore Toshniwal), which comes within the

preview of Section 43 of the Code. The said transaction is also executed

within the stipulated look back period. Thus having regard to the deeming

fiction provided in Section 43 of the Code this transaction would be deemed

to be a preferential transaction and the onus shifts to the appellants to show

as to how this transaction and others were done in ordinary course of

business. The appellants have failed to explain these transactions and have

raised technical issues. Thus, the only question is now required to be

answered is that when the aforesaid transaction having been held to be a

preferential one in view of Section 43 of the Code, whether any direction as

contained in the Impugned Order, could be issued under Section 44 of the

Code to the Appellant No.1 to pay the amount?

48. Thus Section 44(1)(d) of the Code contemplates a direction requiring

any person to pay such sums in respect of benefits received by him from the

Corporate Debtor as Adjudicating Authority may direct. Thus as observed

above, the provision of Section 44 is aimed at reversing the effects of

Company Appeal (AT) (Ins) No. 1437 of 2023 27 of34 preferential transactions and when the effects of preferential transaction are

reversed, the person who has received benefits from the transactions, can be

required to pay the sum which he has received under the preferential

transaction.

49. At this juncture it is also required to be recalled that it is an admitted

situation that Appellant No.1, to whom the direction has been given to pay

the aforesaid amount, was admittedly the Director of the CD at relevant time

and is also the son of the deceased Late Kamal Kishore Toshniwal and also

his legal representative and heir apparent. The term legal representative has

not been defined in the Code, therefore reference of it may safely be

borrowed from the definition provided to it under Section 2(11) of the Code

of Civil Procedure, which provides as under: -

"2(11) legal representative" means a person who in law represents the estate of a deceased person, and includes any person who intermeddles with the estate of the deceased and where a party sues or is sued in a representative character the person on whom the estate devolves on the death of the party so suing or sued;"

According to the aforesaid provision, a person who in law represents the

estate of a deceased person and the person who inter meddles with the

estate of the deceased are his LRs. The RP after the death of late Kamal

Kishore Toshniwal get the heirs of the deceased impleaded as legal

representative, including the appellant No.1 and since he is to inherit the

property and asset from the deceased father he could be held liable to part

that much of the amount by which the deceased/ Proprietor Kamal Kishore

Toshniwal was benefited by the impugned preferential transaction.

50. It has been stated by the Appellant No.1 in the Email dated

28.10.2020 written to the RP that they have not received the requisite

Company Appeal (AT) (Ins) No. 1437 of 2023 28 of34 certificate from the Court, but they have not produced either any order of

the Court or any certificate which may reflect on the defense taken by them

that they were not having any connection with the Toshniwal enterprises,

the proprietor Firm owned by their father. But they could not deny the fact

that they are class I heirs of the deceased Kamal Kishore Toshniwal and in

normal course they might have succeeded to the estate of their deceased

father and are liable to return the benefit taken by their father under

impugned transaction. So it is not a case where the liability of the Appellant

No.1 has been held only on account of him being the Director of the CD,

rather the liability of the Appellant has been fixed also, on account of him

being the son of the deceased Kamal Kishore Toshniwal, proprietor of the

firm Toshniwal Enterprises, to whom the preferential transaction was made

and significantly the deceased Kamal Kishore Toshniwal was also a Director

in the CD at relevant point of time. Therefore, the Late Kamal Kishore

Toshniwal and the Appellant No.1, both were the beneficiary of the

preferential transaction made to Toshniwal Enterprises. We have already

held that the aforesaid transaction pertaining to Toshniwal Enterprises,

owned by the deceased was preferential one and made to a related entity

within the look back period.

51. In view of above discussion, we don't find any infirmity with regard to

the conclusions drawn by the Ld. Tribunal pertaining to this transaction

also and the findings returned by the Ld. tribunal are liable to be affirmed.

52. Ld. Counsel for the appellant has also highlighted the prayer 6 (c) and

(d) of the application in order to show that the RP as well as the Ld.

Adjudicating Authority has not taken into account the credit entries

Company Appeal (AT) (Ins) No. 1437 of 2023 29 of34 appearing in the bank accounts of the CD and have only chosen debit

entries and had the credit entries emerging in the account were taken into

consideration the net figure of Rs. 112,000-57,000= Rs. 55000/- and Rs.

8,859,000-8,500,000= Rs. 359,000/-, would have arrived.

53. Strong objection has been taken by Ld. Counsel for the Respondents

to this submission and it is submitted that prayer 6 (c) and (d) of the

application are with regard to Holdwell Tradecom Pvt. Ltd. and M/s Nand

Lal Kamal Kishore Vyapaar Pvt. Ltd. to pay Rs. 112,000/- and Rs.

37,059,000/- respectively and these two entities did not contest the

application before the Ld. Adjudicating Authority and have not filed any

appeal before this appellate tribunal also, therefore, these findings have

become final so far as these entities are concerned and the appellant cannot

argue on their behalf, in the appeal preferred by appellants with regard to

their own grievances. It is also submitted that on the day of hearing it was

indicated and brought in the notice of the Ld. Tribunal by Ld. Counsel for

the RP that figure of Rs. 37,059,000/- has inadvertently been wrongly

mentioned due to typographical mistake and the same be read as Rs.

1,16,79,000/- and this submission of the counsel was duly recorded in the

judgment.

54. Having considered the rival submissions made by Ld. Counsel for the

parties we find force in the submissions made by Ld. Counsel for the

Respondents as the appellants may not be aggrieved by the grant of prayer 6

(c) and (d) of the application which were pertaining to the other entities and

those entities neither contested the application before the Ld. Adjudicating

Authority nor has filed any appeal against the impugned order and these

Company Appeal (AT) (Ins) No. 1437 of 2023 30 of34 findings which have been recorded against these entities could only be

challenged by them, alone. Moreover, we also notice that the Ld. Tribunal

has granted the prayer 6 (d) to the extent of Rs. 1,16,79,000/- and it was

indicated at the time of hearing of the application before the Ld. Tribunal by

Ld. Counsel for the RP that figure of Rs. 37,059,000/- has been wrongly

mentioned and therefore the same be read as Rs. 1,16,79,000/-. Thus in

our understanding no illegallity has been committed by the Tribunal in this

regard also.

55. The other submissions of Ld. Counsel for the appellants is pertaining

to prayer 6(e) of the application wherein the consolidated amount of all the

prayers have been mentioned and it is submitted that the RP had calculated

the amount mentioned in the prayer 6 (e) separately as well as collectively

and even the amount of those prayers [6 (f) and (g)], which have not been

granted has been included therein.

56. On the other hand, Ld. Counsel for the Respondents submits that the

consolidated amount of all the prayers was mentioned in this prayer as at

that time it could not be contemplated that Ld. Tribunal will not grant some

of the prayers and as Ld. Tribunal has not granted prayers 6 (f) and (g) of

the application, the amount which was mentioned in the prayer 6 (e) has

now been reduced to Rs.1,16,79,000/-.

57. We notice that the Ld. Adjudicating Authority by passing the

impugned order while declaring the impugned transactions as preferential

and fraudulent in terms of Section 43, 45, and 66 granted all the reliefs

sought by the applicant/RP except the relief contained in paragraph 6 (f)

and (g). Certainly, the amount which has been mentioned in 6 (e) is Rs.

Company Appeal (AT) (Ins) No. 1437 of 2023 31 of34 74907638/- and this is the cumulative figure of all the prayers originally

claimed by the applicant in his application and having regard to the fact

that prayer 6 (f) and (g) has not been granted by the Ld. Tribunal the net

figure in this relief i.e. 6 (e) should have been Rs. 19,900,628 /- (Rs.

927,028/- + Rs.7,182,600/-+ Rs. 112,000+ Rs.1,16,79,000/-).

58. We are also of the considered view that appeal is the continuation of

the proceedings of the subordinate court and if any infirmity with regard to

the calculation of the amount has been committed by Ld. Adjudicating

Authority the same may be corrected by the Tribunal as well as by this

Appellate Tribunal in appeal. Thus, in our considered view the figure of Rs.

74,907,638/- shall be read only to the extent the reliefs have been granted

by the Ld. Adjudicating Authority, as affirmed by this Appellate Tribunal.

59. Ld. Counsel for the appellant has also touched upon the infirmities in

prayer 6 (f) and (g) but we are not inclined to enter into the discussion for

the same on the ground that these prayers have not been granted by Ld.

Tribunal and therefore there is no reason that the appellants may be

aggrieved by the same, more so when no appeal has been preferred by the

Resolution Professional against the impugned order.

60. Ld. Counsel for the appellant in the last has placed much emphasis

on the insufficiency of material available with the transaction auditor as well

as before the ld. Tribunal and submits that keeping in view the insufficiency

of material/evidence no conclusions could have been drawn with regard to

the preferential transactions with related party. At the cost of repetition we

reiterates that the transaction auditor in its report has classified the entities

as related parties which has not been disputed by the appellants and the

Company Appeal (AT) (Ins) No. 1437 of 2023 32 of34 transactions which have been highlighted by the transaction auditor are

based on the bank account statements of the CD and even these

transactions have not been disputed by the appellants and the only

objections which are being raised are of hyper technical nature and are

centered around the mentioning of wrong figure in the prayer clause of the

application moved by the RP before the Ld. Adjudicating Authority, however,

no justification or explanation has been provided as to how these

transactions could be deemed to have been performed in regular course of

business. Once, it was established that money has been transferred to

related entities a reciprocal onus had tilted towards the appellants who were

the Directors of the CD at that point of time to explain as to why these

transactions may not be treated as preferential transactions. We do not have

any hesitation in stating that no explanation at all has been given by the

appellants pertaining to these transactions being done in the ordinary

course of business and thus no illegality appears to have been committed by

Ld. Tribunal in labelling these transactions as preferential and in issuing

consequential directions for deposition of these amounts in the account of

the CD.

61. Having considered all the facts and circumstances of the case and for

the reasons mentioned herein before, we do not find any good ground to

interfere in the findings recorded by the Tribunal in the impugned judgment

and therefore the Appeal appears to be devoid of merits and dismissed as

such.

Company Appeal (AT) (Ins) No. 1437 of 2023 33 of34

62. There is however no order as to costs. Pending IA's if any shall also

stand closed.

[Justice Mohd. Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical)

New Delhi.

21.01.2026.

sr

Company Appeal (AT) (Ins) No. 1437 of 2023 34 of34