Slb Welfare Association vs Psa Impex Private Limited & Ors

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 905 of 2022 (Arising out of Order dated 25.07.2022 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi Bench Court-III in IA-2427/2022 in IB-11(ND)/2022)

IN THE MATTER OF: SLB Welfare Association Through its President - Dr. Akanksha Aggarwal GH-06B, Sector - CHI-V, 2nd Milestone, Greater Noida, Uttar Pradesh-201310. .... Appellant Vs 1. M/s PSA IMPEX Private Limited, Through its IRP - Mr. Prabhat Ranjan Singh A-118, Pocket-6, Mayur Vihar, Phase-III, New Delhi-110096.

2. M/s Rudra Buildwell Constructions Pvt. Ltd., Through its Owner-Shri Raj Kumar 314, F/F Pocket-6, Mayur Vihar, Phase-III, New Delhi-110096. .... Respondents

Present: For Appellant: Mr. Abhijeet Sinha, Mr. Shantanu Singh, Mr. Ravi Sehgal, Mr. Aditya Shukla, Ms. Divya Narayanan, Advocates

For Respondent: Mr. Saurabh Jain, Advocate for Impleader (SLAB Home Buyer's Welfare Association) Mr. Abhishek Anand, Mr. Nipun Gautam, Mr. Pathik Chaudhury, Advocates for R-1 Mr. Gaurav Mitra, CS Gaurav Joshi, Mr. Atul Bhatia, Advocates for R-2 Mr. Prabhjot Ranjan Singh for RP

With Company Appeal (AT) (Insolvency) No.642 of 2022 (Arising out of Order dated 18.04.2022 passed by the Adjudicating Authority (National Company Law Tribunal), New Delhi (Court No.III) in Company Petition No. IB-11/ND/2022)

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 1 IN THE MATTER OF: SLB Welfare Association Through its President - Dr. Akanksha Aggarwal GH-06B, Sector - CHI-V, 2nd Milestone, Greater Noida, Uttar Pradesh-201310. .... Appellant Vs 1. M/s PSA IMPEX Private Limited, Through its IRP - Mr. Prabhat Ranjan Singh A-118, Pocket-6, Mayur Vihar, Phase-III, New Delhi-110096. 2. M/s Rudra Buildwell Constructions Pvt. Ltd., Through its Owner-Shri Raj Kumar 314, F/F Pocket-6, Mayur Vihar, Phase-III, New Delhi-110096. .... Respondents

Present: For Appellant: Mr. Abhijeet Sinha, Mr. Shantanu Singh, Mr. Ravi Sehgal, Mr. Aditya Shukla, Ms. Divya Narayanan, Advocates

For Respondent: Mr. Saurabh Jain, Advocate for Impleader (SLAB Home Buyer's Welfare Association) Mr. Abhishek Anand, Mr. Nipun Gautam, Mr. Pathik Chaudhury, Advocates for R-1 Mr. Gaurav Mitra, CS Gaurav Joshi, Mr. Atul Bhatia, Advocates for R-2 Mr. Prabhjot Ranjan Singh for RP

JUDGMENT

ASHOK BHUSHAN, J.

These two Appeal(s) have been filed by the same Appellant,

challenges orders dated 18.04.2022 and 25.07.2022 passed the National

Company Law Tribunal, New Delhi Bench, Court No.III in C.P. IB-

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 2 11(ND)/2022. Both the Appeal(s) have been heard and are being decided

by this common judgment.

2. Brief facts of the case necessary to be noticed for deciding these

Appeal(s) are:

(i) M/s PSA IMPEX Private Limited, the Corporate Debtor

launched a House Building Project in the year 2012 to be

completed within 36 months. The Appellant Registered Society

of the Homebuyers and Allottees of Project Sampada Livia

Apartments was formed on 29.11.2018 Registration of

Certificate was also obtained.

(ii) There being delay in completion of the Project, Homebuyers of

the Project approached the Real Estate Regulatory Authority

(hereinafter referred as "RERA") under Real Estate (Regulation

and Development) Act, 2016 by filing a complaint. RERA

conducted an inspection of the Project site on 18.02.2019 and

found that only 10% of the work has been started and from

March 2016 work was abandoned. The erstwhile Promoter

was lodged in jail since 04.01.2019. An email dated

04.08.2019 was sent by the Corporate Debtor addressing

buyers that the Corporate Debtor has handed over the Project

to M/s. Rudra Buildwell Constructions Pvt. Ltd. and has also

transferred all the shares for expeditious completion of the

Project.

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 3

(iii) The RERA passed an order on 30.09.2019 after issuing a Show

Cause Notice to the Corporate Debtor, cancelling the

registration of the Project. The order contemplated further

proceeding for completion of the remaining construction work.

The RERA issued a public notice on 07.12.2019 calling upon

Association of Allottees to submit a viable proposal for

completion of the remaining development work of the Project.

The Appellant SLB Welfare Association submitted a proposal

to complete the balance development work with detailed

Project Report for revival of the Project. The Project was

evaluated by the Project Advisory & Monitoring Committee

constituted under the Chairmanship of Hon'ble Member of

U.P. RERA. A letter dated 26.06.2020 was issued by the

Secretary of RERA to the Corporate Debtor for handing over

the site of the Sampada Livia Project to the Appellant for

completing the remaining construction and development work

within three days. The possession of the Project site was

handed over to the Appellant on 29.06.2020.

(iv) Challenging the order dated 30.09.2019 passed by the RERA,

an Appeal was filed before the U.P. Real Estate Appellate

Tribunal by the Corporate Debtor through its authorised

signatory (Shri Raj Kumar). The Appellate Authority vide its

order dated 20.10.2020 dismissed the Appeal filed by the

Corporate Debtor, upholding the order dated 30.09.2019 of the

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 4 RERA. Challenging the order dated 20.10.2020 a Second

Appeal No.121 of 2020 was filed by the Corporate Debtor

through its authorised signatory Shri Raj Kumar in the High

Court of Judicate at Allahabad, which Appeal was also

dismissed by the High Court vide its judgment dated

09.03.2021. Aggrieved again by the order dated 09.03.2021,

the Corporate Debtor through its authorised signatory Shri Raj

Kumar filed a Special Leave Petition on 14.12.2021, which is

still pending in the Hon'ble Supreme Court in defect.

(v) M/s. Rudra Buildwell Constructions Pvt. Ltd. claiming to be

an Operational Creditor filed an Application under Section 9 of

the Insolvency and Bankruptcy Code, 2016 (hereinafter

referred to as the "Code") being IB-461(ND)/2021, which

Application was withdrawn on the submission of the Counsel

for the Operational Creditor that Application is hit by Section

10A of the Code. The Adjudicating Authority vide order dated

29.11.2021 permitted the Operational Creditor to withdraw

the Application, which Application was dismissed as

withdrawn.

(vi) Within a week from the withdrawal of the aforesaid

Application, a notice under Section 8 of the Code was issued

by the Operational Creditor M/s. Rudra Buildwell

Constructions Pvt. Ltd. dated 06.12.2021 to the Corporate

Debtor demanding payment of an unpaid operational debt of

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 5 Rs.5,39,60,674/- including interest. The date of default

mentioned in the Application was 31.03.2020.

(vii) The Application came for consideration before the Adjudicating

Authority on 12.01.2022. The Adjudicating Authority being

prima facie of the view that date of default being 31.03.2020,

the Application is hit by Section 10A, permitted the Counsel

for the Operational Creditor to file an additional affidavit within

two weeks. An additional affidavit was filed by the Operational

Creditor. Thereafter, notice was issued to the Corporate

Debtor. The Corporate Debtor neither filed any reply to Section

9 Application nor appeared before the Adjudicating Authority.

The Adjudicating Authority proceeded ex-parte on 22.03.2022

against the Corporate Debtor. The Adjudicating Authority

heard the Counsel for the Operational Creditor and vide order

dated 18.04.2022 admitted Section 9 Application and

appointed Mr. Prabhat Ranjan Singh as Interim Resolution

Professional ("IRP").

(viii) The Company Appeal (AT) (Insolvency) No.642 of 2020 was

filed by the Appellant challenging the order dated 18.04.2022.

In the said Appeal, this Tribunal issued notice on 06.06.2022

and granted two weeks' time to file reply.

(ix) The IRP filed an IA No.2427 of 2022 under Section 60, sub-

section (5) read with Section 18(f) of the Code and Rule 11 of

the NCLT Rules, 2016, seeking a direction against the

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 6 Appellant to handover the control of the Project site to the IRP.

In the IA No.2427 of 2022, notices were issued by the

Adjudicating Authority and a common reply was filed to the IA

No.2427 of 2022 and IA No.2345 of 2022, in which reply,

Appellant gave all details regarding proceedings before RERA.

It was stated that Project has been transferred to the Appellant

by order of the RERA dated 26.06.2020, which has also been

approved by the State Government. It was also pleaded that

Operational Creditor has approached the Adjudicating

Authority with unclean hands and has suppressed material

facts.

(x) The Adjudicating Authority heard the parties on IA No.2427 of

2022 and IA No.2345 of 2022 and by an order dated

25.07.2022 allowed the IA no.2427 of 2022 and directed the

Appellant to handover peaceful possession and custody of the

project in question to the IRP within two weeks. IA no.2345

was also allowed directing the appointment of Mr. Akarsh

Kashyap as Authorised Representative of Financial Creditor of

the Corporate Debtor.

(xi) Aggrieved by the order dated 25.07.2022 Company Appeal (AT)

(Insolvency) No.905 of 2022 is filed by the Appellant.

3. When the Appeal was taken up on 03.08.2022 by this Tribunal, a

statement was made by learned Counsel for the IRP that no further step

shall be taken by Friday. By subsequent order dated 05.08.2022, the order

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 7 of the Adjudicating Authority dated 25.07.2022 was stayed by this

Tribunal.

4. We have heard Shri Abhijeet Sinha, learned Counsel for the

Appellant, Shri Gaurav Mitra, learned Counsel for Respondent No.2 - M/s.

Rudra Buildwell Constructions Pvt. Ltd., Shri Abhishek Anand, learned

Counsel appeared for Corporate Debtor and Shri Saurabh Jain, learned

Counsel has been heard for SLAB Home Buyer's Welfare Association, who

was permitted to intervene in the Appeal(s). We have also heard learned

Counsel appearing for the IRP.

5. The learned Counsel for the Appellant submits that insolvency

proceedings were fraudulently initiated by the Operational Creditor in

collusion with the Corporate Debtor. It is submitted that both the

Corporate Debtor and Operational Creditor are controlled by the same

person, i.e., Shri Raj Kumar and both entities are one and the same.

Initiation of Corporate Insolvency Resolution Process ("CIRP") by

Operational Creditor was not for any purpose of insolvency resolution, but

was with an object to defeat the rights of the Appellant. It is submitted

that Application under Section 9 was not a genuine Application. The

invoices filed in support of Section 9 Application were all cooked-up

invoices manufactured for the purpose of the case. The entire transaction

forming basis of Section 9 Application pertains to the period August 2019

to 31.5.2021, during which period Shri Raj Kumar, Chairman of the

Operational Creditor had already joined the Board of Director of the

Corporate Debtor and owned 99.75% shares of the Corporate Debtor. The

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 8 Project having been de-registered by order dated 30.09.2019 and the

Project having been handed over to the Appellant vide order dated

26.06.2020, there was no occasion for Corporate Debtor entering into any

transaction with the Operational Creditor and all claims by the Operational

Creditor of supplying material and security were fictitious and non-

existent. The Operational Creditor has not filed any GST invoices along

with Section 9 Application. The proforma invoices filed do not mention any

invoices number and GST number and are self-prepared documents. It is

mandatory to mention GST number and also the GST amount in the

invoices as required by law. The Operational Creditor has also not filed E-

way bills in support of Section 9 Application. The proforma invoices have

been prepared much after the date of alleged supply, which is also

impermissible. The Operational Creditor has approached the Adjudicating

Authority with unclean hands and suppressed material facts. Section 9

Application did not mention that an earlier Application filed under Section

9 had been dismissed as withdrawn. The Operational Creditor also failed

to disclose the material fact that rights in Project were transferred to the

Appellant as per direction of the RERA dated 06.06.2020 and 26.06.2020.

The contentions raised by SLAB Welfare Association supporting the CIRP

are malafide and the SLAB has been setup by the Corporate Debtor and

M/s. Rudra Buildwell Constructions Pvt. Ltd. The SLAB never submitted

any proposal in pursuance of notice published by the RERA inviting

proposals from allottees. It is submitted that Appellant has made several

constructions and is carrying out the Project site with development work.

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 9 It is submitted that present is a case where Section 9 Application has been

filed fraudulently and maliciously, which deserves to be dismissed with

heavy penalty under Section 65 of the Code. Shri Sinha further submits

that rights of the Project vests in the Appellant by virtue of order passed by

RERA and by virtue of Section 14(1) Explanation, there is no conflict with

the order passed by the RERA and those of proceedings under IBC. The

order passed by RERA handing over Project to the Appellant is an order by

sectoral regulator and cannot be suspended or terminated on the grounds

of insolvency. It is further submitted that according to averments made in

Section 9 Application, the date of default being 31.03.2020, the Application

was clearly hit by Section 10A and the mere fact that the acknowledgement

was issued by the Corporate Debtor on 03.06.2021 shall not give any cause

of action to the Operational Creditor to file Section 9 Application. The

reasoning given by the Adjudicating Authority for rejecting argument based

on Section 10A is untenable.

6. Shri Gaurav Mitra, learned Counsel appearing for Respondent No.2-

M/s. Rudra Buildwell Constructions Pvt. Ltd., opposing the submission of

learned Counsel for the Appellant contends that Application under Section

9 was for genuine debt. The Operational Creditor has supplied materials,

security services and plant machinery for which proforma invoices and gate

passes have been filed. It is submitted that proforma invoices are issued

at the time of work being carried out and thereafter while raising final

invoices, GST payments are made. Non-mention of GST number and

amount is inconsequential. The Sainik Security Bureau has given

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 10 acknowledgement for receipt of amount of Rs.28,23,000/- from the

Operational Creditor relating to security services provided from April 2019

to June 2021 at the site of Corporate Debtor, which are supported by Bank

transactions, proforma invoices. Regarding materials supplied and gate

passes invoices have been filed along with Section 9 Application, which

prove the genuine debt claimed by the Operational Creditor. Ledger of M/s

PSA IMPEX Private Limited as maintained by M/s. Rudra Buildwell

Constructions Pvt. Ltd. has also been filed, which mentions closing balance

of Rs.3,41,22,413/-. It is submitted that Appellant has no locus to

challenge the order admitting Section 9 Application. The transfer of

shareholding by the Corporate Debtor in favour of Mr. Raj Kumar has not

been recognized by the High Court in its judgment dated 09.03.2021 it has

been held that without obtaining prior approval, the transfer of shares are

vitiated and non-est. Hence, there is no question of Operational Creditor

having any shareholding under the law. The provisions of IBC shall

override the provisions of RERA and order passed by RERA, handing over

Project to the Appellant cannot come in the way of initiation of CIRP, nor

there is any flaw in the Adjudicating Authority directing the Appellant to

handover the Project in favour of the Respondent.

7. The learned Counsel appearing for SLAB Welfare Association,

opposing the submission of learned Counsel for the Appellant contends

that Appellant cannot engage itself in the construction of the Project or to

manage the Project. The buyers in the Appellant Association are losing

trust and confidence. The Appellant's Association has neither competence

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 11 nor finances to complete the construction. The order of Adjudicating

Authority directing the Appellant to handover the Project to IRP is justified.

Many buyers are now interested in refund and do not want the flats any

more. The learned Counsel for SLAB Welfare Association supports the

submission of learned Counsel for M/s. Rudra Buildwell Constructions Pvt.

Ltd.

8. We have considered the submission of learned Counsel for the

parties and have perused the records.

9. The learned Counsel for the Appellant has laid much emphasis on a

submission that proceedings under Section 9 have been initiated by

Operational Creditor fraudulently and in collusion with Corporate Debtor.

For appreciating such submission, we need to notice the sequence of the

events and various proceedings undertaken with regard to Project in

question.

10. While noticing the facts of the case, we have noticed that Project was

announced in 2012 and it was to be completed within 36 months and when

there was inordinate delay in completion of the Project, the complaints were

filed before the RERA by the Homebuyers. On complaints filed by the

Homebuyers, Show Cause Notice was issued by the RERA to the Corporate

Debtor on 08.03.2019. After receipt of the complaints, inspection was got

conducted by the RERA. In the inspection, Officials of the RERA found

that no construction work was going on and also only 10% structural work

was completed. In compliance of the order passed by RERA, the Chief

Executive Officer, Greater Noida Authority got conducted audit of the

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 12 project, where Report was submitted that diversion of Rs.47 crores was

made by the Promoter, out of funds received from the allottees. Before the

RERA, the Promoter in explanation has stated that they have managed to

get association of M/s. Rudra Buildwell Constructions Pvt. Ltd., who is

going to get the Project complete. A finding was recorded by RERA in its

order dated 30.09.2019 that funds deposited by the allottees were used

elsewhere and forgery has been found to be committed by the Promoters.

RERA vide its order dated 30.09.2019 has cancelled the registration of the

Project. Against the order passed by RERA dated 30.09.2019, an Appeal

was filed by the Corporate Debtor through its Authorised Signatory. The

Authorised Signatory, who filed the Appeal is none else than Mr. Raj

Kumar, through whom Section 9 Application was filed by the Operational

Creditor. After dismissal of the Appeal by the RERA Appellate Authority,

Second Appeal was filed in the High Court by Corporate Debtor through

Mr. Raj Kumar. The Memo of Parties of Second Appeal is describing the

Appellant is "Psa Impex Private Ltd. Thru Authorised Signatory Raj Kumar".

The Corporate Debtor itself has sent an email to all Homebuyers on

04.08.2019, which has been filed at Annexure A-19 to Company Appeal

(AT) (Insolvency) No.905 of 2022, where the Corporate Debtor has informed

the buyers that Corporate Debtor has handed over the Company to Mr. Raj

Kumar, who is Director of M/s. Rudra Buildwell Constructions Pvt. Ltd.

and transferred all the shares. In the Second Appeal before High Court,

the Promoter has categorically pleaded that owner of M/s. Rudra Buildwell

Constructions Pvt. Ltd. had taken on Board as Director of M/s PSA IMPEX

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 13 Private Limited and 99.75% shares has been transferred to him. We may

notice in this context paragraph 6 of the judgment of High Court dated

09.03.2021 dismissing the Second Appeal filed by Corporate Debtor Shri

Raj Kumar, which is to the following effect:

".... The Promoter submitted its reply to the letter dated 17.05.2019 on 20.05.2019, saying that the owner of M/s Rudra Build Well Sri Raj Kumar had been taken on board as Director of M/s PSA Impex Pvt. Ltd. and 99.75% shares had been transferred to him."

Further, in paragraph 16, following has been noted by the High

Court:

16. In the reply dated 06.05.2019, it was informed that all the shares/ assets and liabilities of the Promoter had been transferred to the new builder that is M/s.

Rudra Build Well Constructions Pvt. Ltd. and the new Promoter had contacted the architect to update the plan of the Project as per the Green Building Norms and to get it registered under "GRIHA" or "IGBC". A revised construction schedule for each of the towers has been given by the new promoter."

11. The aforesaid facts clearly indicate that the Promoter case

throughout was that entire Project was handed over to Mr. Raj Kumar, the

owner of M/s. Rudra Buildwell Constructions Pvt. Ltd., who has taken over

the Project. It is relevant to notice that order dated 30.09.2019 passed by

RERA cancelling the registration, was challenged by the Corporate Debtor

through Mr. Raj Kumar, the Authorised Representative both before U.P.

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 14 Real Estate Appellate Tribunal and in Second Appeal before the High Court

was by Mr. Raj Kumar. It is, thus, Raj Kumar who is contesting and

challenging the proceedings of RERA before the U.P. Real Estate Appellate

Tribunal and the High Court. The orders passed by RERA for handing over

Project to the Appellant was also challenged by the Corporate Debtor and

the Corporate Debtor failed to assail the order passed by the RERA by

which registration was cancelled and Project was handed over to the

Appellant. Mr. Raj Kumar, the owner of M/s. Rudra Buildwell

Constructions Pvt. Ltd. filed Section 9 Application claiming unpaid debt.

12. The facts of the present case make it amply clear that object of filing

Section 9 Application by the Operational Creditor was not for resolution of

insolvency of Corporate Debtor, but was an attempt to stop the

implementation of RERA order and to take back the Project from the

Appellant. Mr. Raj Kumar, the Director of M/s. Rudra Buildwell

Constructions Pvt. Ltd. has been challenging the orders passed by the

RERA in First Appeal and Second Appeal on behalf of the Corporate Debtor.

The Operational Creditor, thus, Mr. Raj Kumar, who has filed Section 9

Application as Director of M/s. Rudra Buildwell Constructions Pvt. Ltd. has

clearly identified himself with the Corporate Debtor and was espousing the

cause of the Corporate Debtor by challenging the order of the RERA. The

object for enactment of the IBC Code is to re-ogranisation and insolvency

resolution of the Corporate Persons. Section 9 Application filed by M/s.

Rudra Buildwell Constructions Pvt. Ltd. through Shri Raj Kumar was not

for purposes of any insolvency resolution of the Corporate Debtor, rather

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 15 was to frustrate the implementation of orders passed by RERA and to take

back the Project from the Appellant, who has lawfully entrusted the Project

for completing the unfinished work. The learned Counsel for the Appellant

has relied on the provisions of Section 65 of the Code, which is to the

following effect:

"65. Fraudulent or malicious initiation of proceedings. -

(1) 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 impose upon a such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees. (2) If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees but may extend to one crore rupees.

(3) If any person initiates the pre-packaged insolvency resolution process--

(a) fraudulently or with malicious intent for any purpose other than for the resolution of insolvency; or

(b) with the intent to defraud any person,

the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees."

13. The sequence of the events and the various proceedings taken with

regard to Project in question by the Homebuyers as well as by the Corporate

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 16 Debtor, indicate that CIRP initiated by the Operational Creditor by filing

Section 9 Application was for purposes other than for the resolution of

insolvency, which we have noted above. When we further notice several

other facts pertaining to Section 9 Application, our conclusion is re-

emphasized that Section 9 Application was for purposes other than the

insolvency resolution process. Following are the further facts, which lend

support to our above conclusion:

(i) When we look into the invoices which are basis of Section 9

Application, it is clear that the invoices, which have been filed

are only proforma invoices, claimed to be prepared on one day,

i.e. 31.03.2020 bears the date of 31.03.2020 and contains the

particulars of various materials supplied from 25.08.2019 to

19.01.2020. Proforma invoices are prepared in one day. The

proforma invoices do not contain any GST number. The

Central GST Act, 2017 requires to issue tax invoices with

description of quantity, value of goods and tax charged

thereon. The Rules framed under Central GST Act also require

mentioning of particulars of name and address and goods and

services tax identification number of the supplier and the

invoices are required to be issued within a period of 30 days of

supply of service. Similar are the provisions of UP GST Act.

The invoices are not claimed to have been issued within one

month from the date of supply of goods, material or services

and also not mentions the GST number or amount of tax,

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 17 which proves the contention of the Appellant that they have

been prepared for the purposes of the case.

(ii) The ledgers of Corporate Debtor maintained by M/s. Rudra

Buildwell Constructions Pvt. Ltd. indicate that ledgers are not

prepared in an ordinary course of business. At page 389 of

Vol.III of Company Appeal (AT) (Insolvency) No. 905 of 2022, a

ledger has been filed by the Operational Creditor. The ledger

does not bear any date as to when it was prepared. It is useful

to extract the ledger, which is to the following effect:

Rudra Buildwell Constructions Pvt. Ltd. Regd Office: 314, Pocket D, Mayur Vihar Phase-II, Delhi-110091 CIN NO: U45400DL201PTC209162 Ledgers of M/s PSA Impex Private Limited S. No. Date Particulars Qty Amount 1 31/12/2019 Cement in Bags 1143 341600 2 14/01/2020 Core Sand in cft 10050 452250 3 10/01/2020 Rori in cft 7000 336000 4 13/12/2019 Flyash Bricks 309111 1483733 5 11/03/2020 Labour Expenses 2675000 6 31/05/2020 Security Services 2823000 7 31/10/2020 Salaries 998000 8 31/05/2021 Legal 2117330 9 11/06/2019 Plant & Machinery 20000000 and Scaffolding 10 26/11/2020 Loan 2610000

The entries in the ledger are not in normal course of business

and the same are in haphazard manner. Entries of 2021 have

been made even before entries of 2019 and 2020. The ledgers

appear to be prepared on any date subsequent to 31.04.2021

on one day and cannot be said to be in ordinary course of

business.

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 18

(iii) It is further relevant to notice that RERA has made inspection

of the site on February 2019 and at that time of inspection, no

work was found to be going on and it was noticed that for last

two years the work has stopped. The Project was handed over

to the Appellant on 29.06.2019. In the Section 9 Application

the Operational Creditor has claimed the amount from August

2019 to May 2021. When work of the Corporate Debtor was

found stopped in February 2019 and the complaints were filed

before RERA that no work is being undertaken since 2018 and

thereafter inspection was conducted, we are inclined to accept

the submission of the Appellant that neither any material was

supplied by the Operational Creditor to the Corporate Debtor

nor any work was undertaken by the Corporate Debtor during

the period, when it is claimed that materials were supplied and

services were provided. Inspection Report dated 21.02.2019

have been brought on record, which is at Annexure A-16 in

Company Appeal (AT) (Insolvency) No.905 of 2022. It is useful

to extract the conclusion of Inspection Report, which is to the

following effect:

"Conclusion As per the inspection, Site has been shut since a long time and there was only one watchman present at the gate. Though the site office was available, it seems to be closed from many days (Mostly Years). The construction work was started and then left in the midst of the work, it seems to

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 19 be only 10-15% of the construction works has been started. A tower was raised and basic foundation work has been started for other towers which were put at halt. We also found that no promoter/ builder nor the site representatives were available at site.

Looks like the site has been non-functional from a long time. Presently the boarding of the site office is named as "Altureo Residency" which seems that the name of the project has been changed but the registered project name in UP RERA is "Sampada Livia". As per the buyer/ complainant, the promoter/ builder were not responding to their calls/ emails regarding the project. Note: Photographs of the respective project project (Project Sampada Livia) were attached below:"

(iv) The Corporate Debtor before the RERA has categorically stated

that it has handed over the Project to Mr. Raj Kumar, Director

of M/s. Rudra Buildwell Constructions Pvt. Ltd. The claim

under Section 9 for the period from January 2019 to May

2021, when no work was going on in February 2019, when

inspection was conducted. It is difficult to believe that the

Operational Creditor had supplied the materials and further

when on 26.06.2020 the Project was handed over to the

Appellant, there was no occasion to supply any materials to

Corporate Debtor after the said period. In the email dated

04.08.2019, which was sent by the Corporate Debtor to the

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 20 Homebuyers, which also does not indicate that any work was

done on the Project by the Corporate Debtor, so as to able to

utilize the materials supplied by the Operational Creditor

during the relevant period. Rather, it was categorically stated

that it has handed over the Project to Shri Raj Kumar, Director

of M/s. Rudra Buildwell Constructions Pvt. Ltd., who plans to

construct the towers. The materials on record clearly prove

that no work was undertaken by the Corporate Debtor from

January 2019 to 31st May, 2021, which is the relevant period,

during which the Operational Creditor claims to have supplied

the materials and services. The entire case of the Operational

Creditor to supply materials, goods and services appears to be

false and concocted only for the purpose of filing Section 9

Application.

We thus are satisfied that present is a case where penalty is

liable to be imposed on the Operational Creditor under Section

65 of the Code.

14. We may also notice now the submission of learned Counsel for the

Appellant with regard to bar of Section 10A. It is relevant to notice that

Section 9 Application was filed earlier by the same Operational Creditor

being IB No.461(ND)2021, which was dismissed as withdrawn by order

dated 29.11.2021, which is to the following effect:

"Counsel for the Operational Creditor is present. However, there is no representation on behalf of the

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 21 Corporate Debtor. Counsel for the Operational Creditor submits that in view of the default in the present case being on 31.03.2020, he wants to withdraw the present Petition as the same is hit by Section 10A of the IBC 2016. Permission as sought for is granted and the Petition is dismissed as withdrawn."

15. After one week of the aforesaid withdrawal order, notice under

Section 8 was issued on 06.12.2021 by the Operational Creditor to the

Corporate Debtor. In the Notice, which is brought at page 291, it is

mentioned that "date of default is 31.03.2020". Section 9 Application filed

was dated 24.12.2021, in Part-IV of which, following has been mentioned

at Sl. No.2:

2 AMOUNT Rs.5,39,60,674/- (Rupees Five CLAIMED TO BE IN Crore Thirty Nine Lakh Sixty DEFAULT AND THE DATE ON thousand Sixty Hundred Seventy WHICH THE four only) DEFAULT OCCURRED Date of default is 31.03.2020

16. When Application under Section 9 mentions date of default

31.03.2020 and due to which date of default, the earlier Application was

dismissed as withdrawn by the Operational Creditor, what was the reason

for filing another Section 9 Application mentioning same date of default.

The Adjudicating Authority considered the submission regarding bar of

Section 10A and has given following reason for rejecting the submission in

paragraphs 7 and 8, which is to the following effect:

"7. As per Form V, Part IV, the Corporate Debtor is liable to pay an outstanding sum of

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 22 Rs.5,39,60,674/- including interest 18% p.a. The date of default is 31.03.2020 as per Part IV. This Adjudicating Authority vide order dated 12.01.2022 sought clarification as to whether the present case is not hit by Section 10A of the IBC, 2016 and granted 2 weeks' time to the petitioner to file additional affidavit. The Petitioner filed an additional affidavit in compliance with the order dated 12.01.2022 and the relevant portion of the said affidavit is as follows:

"5. That respondent failed to make the payment of outstanding dues to the applicant. The respondent however responded vide letter dated 03.06.2021, wherein he acknowledged the outstanding debt and further stated its inability to repay the same in view of financial stress that respondent has been undergoing. A copy of letter dated 03.06.2021 received from the respondent is attached herewith as Annexure B.

6. That date of default is 03.06.2021 i.e. the date on which the respondent explicitly expressed its inability to pay its outstanding dues on account of financial stress.

7. That pursuant to an inadvertent clerical error, the date of default mentioned as 31.03.2020 at Part IV of the application against "AMOUNT CLAIMED TO BE IN DEFAULT AND THE DATE ON WHICH THE DEFAULT OCCURRED at page no.17 be read as 03.06.2021."

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 23

8. We have perused the additional affidavit filed in compliance of order dated 12.01.2022 and we are convinced that the date of default in the present petition will be considered as 03.06.2021 instead of 31.03.2020. Hence, the present petition is not hit by Section 10A of IBC, 2016 and is maintainable."

17. The reason given by Adjudicating Authority for rejecting argument of

Section 10A was based on alleged acknowledgement letter dated

03.06.2021 received from the Corporate Debtor. When the date of default

given by Operational Creditor in Section 9 Application is 31.03.2020, the

mere fact that acknowledgement has been given by Corporate Debtor on

03.06.2021 accepting the debt, shall not change the date of default. We,

thus, do not agree with the reasons given by the Adjudicating Authority

that since acknowledgement is 03.06.2021, the date of default will become

03.06.2021. The date of default and acknowledgement are two different

events and date of default is not dependent on acknowledgement of debt.

Hence, the Application filed under Section 9 was also liable to be rejected

being hit by Section 10A, especially when on the same ground of date of

default, i.e., 31.03.2020 earlier Application filed under Section 9 was

dismissed as withdrawn one week before giving fresh Section 8 Notice. In

Section 9 Application, which was filed by the Operational Creditor on

24.12.2021, there was not even mention of earlier proceedings initiated by

Operational Creditor being IB-461(ND)/2021. As noted above, on

12.01.2022, the Adjudicating Authority itself formed an opinion that it has

prima facie satisfied that Application is barred by Section 10A and

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 24 thereafter time was granted by the Adjudicating Authority to file additional

affidavit. The additional affidavit gives only explanation of letter by the

Corporate Debtor acknowledging the debt dated 03.06.2021. The letter

dated 03.06.2021 was also before Adjudicating Authority, when order

dated 29.11.2021 was passed dismissing the earlier Application, which was

dismissed as withdrawn.

18. Now we come to Company Appeal (AT) (Insolvency) No.905 of 2022

by which, order dated 25.07.2022 has been challenged. Order dated

25.07.2022 is an order in consequence to initiation of CIRP by order dated

18.04.2022. We having come to the conclusion that initiation of CIRP by

the Operational Creditor was done fraudulently with the purpose other

than insolvency resolution, the initiation of proceeding by Operational

Creditor deserves to be set aside with imposition of penalty under Section

65. The initiation of CIRP itself being vitiated in law, all subsequent orders

passed in the proceedings have to be automatically set aside. We, thus, do

not find any necessity to consider additional submission made by learned

Counsel for the Appellant challenging order dated 25.07.2022.

19. The submission made by learned Counsel appearing for SLAB Home

Buyer's Welfare Association are submission, which has been advanced to

support order dated 25.07.2022 passed by Adjudicating Authority. We

having found the very initiation of the CIRP vitiated in law, the order dated

25.07.2022 becomes unsustainable and cannot be supported by any of the

submission made by learned Counsel for SLAB Home Buyer's Welfare

Association.

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 25

20. In result, both Appeal(s) are allowed. The order dated 18.04.2022 is

set aside and Company Petition No. IB-11/ND/2022 is dismissed as having

been filed malifide for purposes other than resolution of insolvency of the

Corporate Debtor.

21. A penalty of Rs.25,00,000/- (Rupees twenty-five lakhs) is imposed

on Respondent No.2 - M/s. Rudra Buildwell Constructions Pvt. Ltd.

through its owner Shri Raj Kumar to be paid within a period of one month

by Bank Draft drawn in the name of "Pay and Accounts Officer, Ministry of

Corporate Affairs". Consequently, the order dated 25.07.2022 is set aside.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

[Barun Mitra] Member (Technical)

NEW DELHI

4th November, 2022

Ashwani

Company Appeal (AT) (Insolvency) Nos.905 and 642 of 2022 26