Sushil Kumar Singh vs Smt.Shalini Choudhary & Ors

IN THE MATTER OF: Sushil Kumar Singh ...Appellant

Versus Shalini Chaudhary & Ors. ...Respondents

Present: For Appellant: Mr. Anurag Ojha, Advocate. For Respondent: Swaralipi Deb Roy, Advocate for R2 Ms. Tishampati Sen and G. Karthikeyan, Advocates

ORDER

05.08.2022: This appeal is directed against the order dated

13.11.2019 by which an application filed under Section 7 of the Insolvency

and Bankruptcy Code, 2016 (in short 'Code') read with Rule 4 of the

Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules,

2016 (in short 'Rule') by Respondent No. 1 to initiate the Corporate

Insolvency Resolution Process (in short 'CIRP') against the Respondent No. 2

'Mothers' Pride Dairy India Pvt. Ltd.' has been allowed.

2. Shorn of unnecessary details, the brief facts of this case are that

Respondent No. 1, being the Promoter Director and Shareholder, alleged to

have infused an amount of Rs. 19,17,48,515 in the Company i.e. 'Mothers'

Pride Dairy India Pvt. Ltd.' (Corporate Debtor) and was issued 1,29,42,999

equity shares (Rs. 10 each) of a value of Rs. 12,94,29,990/-. The

Respondent No. 1 ceased to be a director of the Corporate Debtor w.e.f.

01.04.2017 and transferred entire shareholding to Respondent No. 3 who is

the current director of the Corporate Debtor.

3. It is also alleged that at the time of saying good bye to the Company,

the Respondent No. 1 agreed to advance a loan of Rs. 2 Crores to the

Corporate Debtor and entered into an agreement on 10.07.2017 that the

said loan shall be repaid to her by the Corporate Debtor in four equal

tranches of Rs. 50,00,000/- each but the loan amount did not carry any

interest. The application under Section 7 of the Code came to be filed with

the allegation that Respondent No. 2 did not pay the first and second

instalments, due on 10.01.2019 and 30.06.2019, total amounting to Rs. 1

Crore. The Respondent No. 1, alleged to have issued a notice of default

dated 19.08.2019, invoking the terms and conditions of the agreement

dated 10.07.2017 for the recovery of the whole amount.

4. While contesting the said application, the Respondent, in the

application before the Adjudicating Authority raised an issue that the

agreement dated 10.07.2017 was later on terminated vide agreement dated

10.12.2018 and therefore, the application filed under Section 7 is not

maintainable. However, the Adjudicating Authority admitted the application

and hence, the present appeal has been filed.

5. At the outset, Counsel for the Appellant has submitted that the

application filed under Section 7 of the Code was not even maintainable

before the Adjudicating Authority because the CIRP proceedings were

already initiated in another case bearing CP (IB) 60/(PB)/2017 by the

Adjudicating Authority vide order dated 27.06.2017 and the moratorium

was also imposed. It is also submitted that once the Company is in CIRP, it

had no jurisdiction to enter into financial transaction.

6. In reply, Counsel for the Respondent No. 1 has though admitted that

application bearing CP (IB) No. 60/(PB)/2017 'M/s Portrait Advertising and

Marketing Pvt. Ltd.' was admitted by the Adjudicating Authority as stated by

Counsel for the Appellant but the public announcement was made by the

IRP on 18.07.2017 much after the execution of the loan agreement on

10.07.2017. It is also submitted that even otherwise the loan amount is

reflected in the balance sheet of the Corporate Debtor.

7. Counsel for Respondent No. 2/RP has submitted that Respondent No.

2 has been unnecessarily made a party because no relief is being sought

against him.

8. We have heard Counsel for the parties and perused the record with

their able assistance.

9. The issue is involved in this case as to whether the loan agreement

dated 10.07.2017 could have been executed at the instance of the Corporate

Debtor after initiation of the CIRP in another proceedings against it?

10. In this regard, it would be suffice to say that once the CIRP

proceedings are initiated and the IRP has been appointed, the Corporate

Debtor shall not have any jurisdiction to enter into any financial transaction

making the Company liable. The argument raised by Counsel for the

Respondent No. 1 that the public announcement was made on 18.07.2017

cuts no ice as it has to be seen on the date on which the CIRP were initiated

and in this case the CIRP were initiated in the case of 'M/s Portrait

Advertising and Marketing Pvt. Ltd.' against the Respondent No. 2 on

27.06.2017, whereas the loan agreement was executed much thereafter on

10.07.2017.

11. Thus, in view thereof, the entire proceedings initiated, at the instance

of Respondent No. 1, by the Adjudicating Authority, by virtue of the

impugned order vitiates, the present appeal is hereby allowed and the

impugned order is hereby set aside.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Kanthi Narahari] Member (Technical)

[Dr. Alok Srivastava] Member (Technical)

Sheetal/RR