Vistra Itcl India Limited & Ors vs Satra Properties (India) Ltd & Ors

Comp. App. (AT) (Ins) No. 1043 of 2024 & I.A. No. 3794 of 2024

(Arising out of the Order dated 02.04.2024 passed by the National Company Law Tribunal, Mumbai Bench -I in I.A. 1626 of 2023 in C.P. (I.B.) No. 1632/MB/2019)

IN THE MATTER OF:

1. Vistra ITCL (India) Limited Through Sandeep Khose (Authorized Person) Regd. Office: IL & FS Financial Centre Plot No C- 22, G Block, Bandra, Kurla Complex, Mumbai, Maharashtra- 40005 Email: dipti.jain@vistra.com ...Appellant No. 1

2. Pratiti Trading Private Limited Through Mr. Shreyans J. Shah (Authorized Person) Regd. Office: Aidan Building, 1st Dhobi Talaolane, Mumbai, Maharashtra-400002. Email: info@mjshahgroup.com ...Appellant No. 2

3. Gajendra Investment Limited Through Mr. Shreyans J. Shah (Authorized Person) Regd. Office: A-1/2, Floor-5, Plot-2, A wing, Aidun Building, John Crasto Lane, Dhobi Talao 1st Lane, Marine Lines, Mumbai, Maharashtra- 400002 Email: info@mjshahgroup.com ...Appellant No. 3

Versus

1. Satra Properties (India) Ltd. Through Ms. Vaishali Arun Patrikar (Resolution Professional) Office at: A2 Shantidoot Society, Parvati Darshan, Opp. Muktangan English School, Pune, Maharashtra- 411009. Email : vapatrikar@gmai.com ...Respondent No. 1 Comp. App. (AT) (Ins.) No. 1043 of 2024

2. Praful Satra R/o 701, Rehana Heights, 6, Chapel Lane, Near Bhagvan Cutpies Centre, Santacruz (W)- 400054 Email: prafulsatra@gmail.com ...Respondent No. 2

3. Vishal R. Karia A-703. Prathamesh Residency, Dadabhai Road, Near Bhavans College, Andheri (W), Mumbai - 400058. Email : vishalkaria@hotmai.com ...Respondent No. 3

4. Kamlesh B. Limbachiya Flat No. 13, 3'd Floor, Om Sainath CHS Ltd, Babhai Ram Mandir Road, Borivali (W), Mumbai - 400092 Email Id: kblimbachiya@gmail.com ...Respondent No. 4

5. Rubina K. Kalyani C/508. Riddhi Apartments, Kalyan Complex, Yari Road, Versova, Mumbai -400061 Email: rubinakalyani@gmail.com ...Respondent No. 5

6. Sahara. A. Murad Room No. 10, Evershine Apartment, Khoja Lane, Near Ram Mandir, Versova, Mumbai - 400061 Email Id: ajani.sara05@gmail.com ...Respondent No. 6

7. Dev Land & Housing Pvt. Ltd. 10th Floor, Dev Plaza, Opp. Andheri Fire Station, S.V. Road, Andheri (West), Mumbai- 400058. Email: devconstruction@gmail.com ...Respondent No. 7

8. C. Bhansali Developers Pvt. Ltd. 5 & ^, Shakti Arcade, Plot No. 5, Sector- 19D, Vashi, Navi Mumbai, Thane- 400703 Email : Abhijeet.bhansali@gmail.com ...Respondent No. 8

Page 2 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

Present

For Appellants: Mr. Vaibhav Gaggar, Sr. Advocate along with Mr. Devashish Chauhan, Ms. Madhura MN & Ms. Jasleen Singh Sandha, Advocates.

For Respondents: Ms. Neha Agarwal, Mr. Pulkit Sharma & Ms. Vanshika Mittal, for R-1. Mr. Malak Bhatt, Ms. Neeha Nagpal & Mr. Shreyansh Chopra, for R-2 to 6. Mr. Aayush Agarwala & Mr. Prakash Jha, for R-7. Mr. Zeeshan Hashmi, for R-8.

JUDGEMENT

(03 .07.2025)

NARESH SALECHA, MEMBER (TECHNICAL)

1. This appeal Company Appeal (AT) (Ins) No. 1043 of 2024 has been filed

by the Appellants i.e. Financial Creditors of the Corporate Debtor, under Section

61 of the Insolvency and Bankruptcy Code, 2016 ("Code"), challenging the

Impugned Order dated 02.04.2024 passed by the National Company Law

Tribunal, Mumbai Bench-I ("Adjudicating Authority") in I.A. 1626 of 2023

filed in C.P. (IB) No. 1632/MB/2019, wherein the Adjudicating Authority has

disallowed the application of the Resolution Professional under Section 66 of the

Code for refund of amount in respect of transactions entered into between the

suspended management and Respondent No. 7 & 8 aggregating to

Rs. 32,59,00,000/- alongwith interest.

Page 3 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

2. Satra Properties (India) Ltd., which is the Corporate Debtor, is the

Respondent No. 1 herein.

3. The Suspended Management (Respondents No. 2-6), M/s Dev Land &

Housing Pvt. Ltd. (Respondent No. 7) and M/s C. Bhansali Developers Pvt. Ltd.

(Respondent No. 8) are the other Respondents herein.

4. The Appellants submitted that the Corporate Insolvency Resolution

Process (CIRP) was initiated against Respondent No. 1 (Corporate Debtor) on

03.08.2020 vide order in CP(IB) No. 1632/MB/2019. The Appellants contended

that the Forensic Audit Report dated 15.11.2021 by M/s BDO India LLP

commissioned by the erstwhile Resolution Professional, conclusively identified

suspicious and fraudulent transactions involving the suspended management and

third parties, including Respondents No. 7 and 8.

5. The Appellants submitted that the Resolution Professional based on his

independent analysis and the Forensic Audit Report preferred an application

being IA No. 1626/2023 in CP(IB) No. 1632/MB/2019 under section 66 of the

Code seeking refund for compensation of loss suffered to the creditors of the

Corporate Debtor in respect of four transactions. The Appellants contended that

the Adjudicating Authority erred in disallowing the application in respect of

transactions with Respondents No. 7 and 8, despite compelling evidence of fraud.

6. The Appellants further submitted that the lack of credible documentation

or justification reinforces the fraudulent nature of the transactions.

Page 4 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

7. The Appellants submitted that an advance of Rs. 29.35 Crore was paid by

the Corporate Debtor to Respondent No. 7 between 10.08.2015 and 31.03.2016,

purportedly for a property purchase, but was entirely written off on 31.03.2020.

The Appellants contended that no evidence exists of any property being acquired,

indicating that the advance was siphoned off in connivance with the suspended

management to defraud creditors.

8. The Appellants submitted that the alleged Memorandum of Understanding

('MoU') dated 18.08.2015 is unenforceable and suspect, as it is printed on a Rs.

100 stamp paper, neither registered nor notarized, despite involving a property

transaction valued at Rs. 75 Crore. The Appellants contended that the MoU's

forfeiture clause (Clause 9), allowing Respondent No. 7 to retain Rs. 29.35 Crore,

is arbitrary and one-sided, designed to facilitate fraudulent transfer of funds. The

Appellants further submitted that under Section 54 of the Transfer of Property

Act, 1882, agreements for the sale of immovable property worth Rs. 100 or more

must be registered, rendering the MoU legally deficient.

9. The Appellants submitted that similarly the Deed of Cancellation dated

20.03.2020, also on a Rs. 100 stamp paper and unregistered, is a sham document

executed to justify the forfeiture of Rs. 29.35 Crore. The Appellant submitted that

the suspended directors made no efforts to recover the advance, indicating

complicity with Respondent No. 7 to defraud the Corporate Debtor's creditors.

The Appellants submitted that the transaction's fraudulent nature is evident from

the suspicious timing of the write-off and cancellation, executed sometime before

Page 5 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

the CIRP admission on 03.08.2020, when the suspended directors knew likely

insolvency.

10. The Appellants submitted that the Adjudicating Authority's reliance on the

MoU and Deed of Cancellation to validate the transaction was erroneous, as these

documents lack legal sanctity. The Appellants contended that the Adjudicating

Authority's order dated 30.01.2024, directing Respondent No. 7 to file account

statements, and its observation that orders could be passed under Section 66(1),

support the Appellant's case that the transaction was fraudulent.

11. The Appellants submitted that a loan of Rs. 3.24 Crore advanced to

Respondent No. 8, a related party, was partly written off in January 2018. The

Appellants contended that the absence of documentation explaining the

transaction's nature indicates it was undertaken to benefit Respondent No. 8 at

the expense of the Corporate Debtor's creditors.

12. The Appellants submitted that the Resolution Professional has discharged

the burden of proof under Section 66 of the Code by presenting the Forensic Audit

Report, ledger accounts, and unregistered agreements as evidence of fraudulent

conduct. The Appellants contended that the Respondents' failure to provide

credible explanations shifts the burden to the Respondent to prove the

transactions' legitimacy, as held in Jaypee Infratech Ltd. v. Axis Bank Ltd.

[(2020) 8 SCC 401].

13. The Appellants submitted that the transactions' suspicious timing, lack of

documentation, unregistered agreements, and related-party involvement establish

Page 6 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

fraudulent intent under Section 66(1) of the Code. The Appellants contended that

the Adjudicating Authority's failure to recognize this constitutes a misapplication

of law. The Appellants submitted that the transaction with Respondent No. 8, a

related party, warrants heightened scrutiny, as related-party transactions are prone

to abuse, as observed in Swiss Ribbons Pvt. Ltd. v. Union of India [(2019) 4 SCC

17]. The Appellant contends that the write-off without justification confirms

fraudulent purpose.

14. Concluding the arguments, the Appellants requested this Appellate

Tribunal to set aside the Impugned Order and allow its appeal.

15. Per contra, the Respondent Nos. 2 to 6 ("Respondents") (Suspended

Director of the Corporate Debtor) denied all averments made by the Appellants

as misleading and baseless.

16. The Respondent Nos. 2 to 6 submitted that the appeal is not maintainable

due to the Appellants' lack of locus standi and authority. The Respondent Nos. 2

to 6 contend that the Board Resolutions dated 23.04.2024 and 05.02.2024 do not

pertain to the present proceedings, rendering the Appellants unauthorized to file

the appeal. The Respondents further submitted that the Appellants, representing

only approximately 30% of the Committee of Creditors ('CoC'), have not

produced any document or authority letter demonstrating that they represent the

entire CoC. The Respondent Nos. 2 to 6 contended that, in the absence of such

authority, the appeal is bad in law and liable to be dismissed.

Page 7 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

17. The Respondent Nos. 2 to 6 submitted that the Interlocutory Application

No. 1626 of 2023, filed two years after the Forensic Audit Report dated

15.11.2021, does not meet the requirements of Section 66 of the Code. The

Respondents contended that the application lacks the three mandatory milestones

under Section 66: a clear 'opinion,' a suitable 'determination,' and a concrete

'finding' of fraudulent intent. The Respondent Nos. 2 to 6 further submitted that

the Resolution Professional failed to comply with Regulation 35A of the IBBI

(Insolvency Resolution Process for Corporate Persons) Regulations, 2016, and

did not establish mens rea against the Respondents, rendering the application

defective.

18. The Respondent Nos. 2 to 6 submitted that the transactions with

Respondent No. 7 and Respondent No. 8 predate the filing of the Section 7

application and fall beyond the two-year look-back period from the CIRP

admission date i.e., 03.08.2020. The Respondents contended that these

transactions were conducted in the ordinary course of business and cannot be

assailed as fraudulent under Section 66 of the Code.

19. The Respondent Nos. 2 to 6 submitted that the Corporate Debtor, engaged

in construction and real estate development, routinely advances monies to third

parties for property purchases through MoUs, as is standard industry practice.

The Respondent Nos. 2 to 6 further submitted that such preliminary agreements,

executed on stamp paper, are followed by registered documents only upon

completion of due diligence and payment. The Respondents submitted that

Page 8 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

transactions undertaken in the ordinary course of business, as per industry

practice, cannot be deemed fraudulent absent clear evidence of intent to defraud.

20. The Respondent Nos. 2 to 6 submitted that the Forensic Audit Report dated

15.11.2021 is inconclusive and unreliable, as it explicitly states that it should not

be relied upon by third parties and does not constitute an audit per Indian auditing

standards. The Respondent Nos. 2 to 6 further submitted that the report's

speculative assertions of "potential suspicion" do not constitute proof of fraud

under Section 66 of the Code.

21. The Respondent Nos. 2 to 6 submitted that the Adjudicating Authority's

order dated 02.04.2024 is well-reasoned and in consonance with the law. The

Respondent Nos. 2 to 6 contended that the Adjudicating Authority correctly held

that the transactions with Respondents No. 7 and 8 do not fall within the purview

of Section 66 of the Code as the Resolution Professional failed to establish

fraudulent intent or wrongful trading.

22. The Respondent Nos. 2 to 6 submitted that the Corporate Debtor entered

into an MoU dated 18.08.2015 with Respondent No. 7 to purchase 2/3rd rights in

land bearing CTS No. 93 and 93/1 to 3/23 at Village Hariali, Taluka Kurla,

Mumbai, for Rs. 75 Crore. The Respondent Nos. 2 to 6 contended that the

Corporate Debtor paid Rs. 29.35 Crore as earnest money, as recorded in the MoU,

which was a preliminary agreement executed on stamp paper, consistent with real

estate industry practice.

Page 9 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

23. The Respondent Nos. 2 to 6 submit that the MoU's Clause 9, which

allowed Respondent No. 7 to forfeit the earnest money if the Corporate Debtor

failed to pay the full consideration by 31.08.2019, was mutually agreed upon. The

Respondent Nos. 2 to 6 contended that the MoU's unregistered status does not

render it invalid, as registration is not mandatory for preliminary agreements

under the Transfer of Property Act, 1882.

24. The Respondent Nos. 2 to 6 submitted that, due to the Corporate Debtor's

inability to pay the remaining consideration owing to litigation and other

extraneous factors, the parties executed a Deed of Cancellation dated 20.03.2020,

forfeiting the Rs.29.35 Crore earnest money per Clauses 4 and 5 of the MoU. The

Respondent Nos. 2 to 6 contended that the deed's unregistered status does not

invalidate it, as registration is not required for cancellation agreements. The

Respondent Nos. 2 to 6 further submitted that the write-off of Rs. 29.35 Crore in

March 2020 was a legitimate accounting adjustment, and Respondent No. 7

refunded Rs. 4.90 Crore to the Corporate Debtor as compensation, as confirmed

by Respondent No. 2 via email to the Resolution Professional.

25. The Respondent Nos. 2 to 6 submitted that the transaction was conducted

in good faith and in the ordinary course of business, with no intent to defraud

creditors. The Respondent Nos. 2 to 6 contended that the Appellants' allegation

of connivance is speculative and unsupported by evidence, such as

communications or agreements indicating fraudulent intent. The Respondent

Nos. 2 to 6 further submitted that the Adjudicating Authority rightly upheld the

Page 10 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

transaction's legitimacy, noting its alignment with industry practice and the

cancellation deed's terms.

26. The Respondents submitted that the transaction with Respondent No. 8,

initiated in 2007, involved the Corporate Debtor's contribution to a Special

Purpose Vehicle (SPV) formed with Respondent No. 8 and along with 11 other

companies to purchase land at Rahatwade, Khopoli, for Rs. 40 Crore through an

auction by the Debts Recovery Tribunal in 2007. The Respondents contend that

the Corporate Debtor's 20% share in the SPV was recorded as an advance. The

Respondent Nos. 2 to 6 submitted that the write-off of Rs. 3.24 Crore in January

2018 was a correction of an advance erroneously recorded as a loan, as no interest

was applicable on the Corporate Debtor's contribution to the land purchase. The

Respondent Nos. 2 to 6 contended that this accounting correction, made in the

ordinary course of business, predates any insolvency proceedings by over two

years, negating any inference of fraudulent intent.

27. The Respondent Nos. 2 to 6 submitted that the transaction was an

investment, and the Corporate Debtor's rights in the SPV's land are preserved,

with Rs. 9.38 Crore expected to be realized upon the land's development or sale.

The Respondent Nos. 2 to 6 contended that the transaction does not result in a

loss to the Corporate Debtor and does not fall under Section 66 of the Code, as it

was not undertaken to defraud creditors. The Respondent Nos. 2 to 6 further

submitted that Respondent No. 8's ongoing CIRP, currently stayed by this

Page 11 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

Appellate Tribunal (03.11.2023), and the deposit of funds with the Tribunal by

Respondent No. 8, ensure no loss accrues to the Corporate Debtor's creditors.

28. It is the case of Respondent Nos. 3,4 & 6 that in the present appeal as well

as in the IA. No. 1626 of 2023 it has been stated that the present Respondents

were a part of the purported fraudulent transactions over the year. However, it is

pertinent to note that present Respondents were only holding office in the

capacity of a non-executive independent director in the Corporate Debtor and

were never engaged in managing the day-to-day affairs of the Corporate Debtor

and thus, could not be held responsible for any purported transactions.

29. The Respondent Nos. 2 to 6 submitted that the Adjudicating Authority

correctly held that the transactions do not fall within Section 66 of the Code, as

the Resolution Professional failed to establish fraudulent intent or wrongful

trading. The Respondents contended that the Appellants' reliance on the timing

of the write-offs is misplaced, as no evidence links these decisions to the

imminent CIRP.

30. Concluding their pleadings, the Respondents 2 to 6 requested this

Appellate Tribunal to dismiss the appeal with costs.

31. The Respondent No. 7 i.e. Dev Land & Housing Private Limited, submitted

that the appeal fails to meet the threshold requirements for initiating proceedings

under Section 66 of the IBC, as laid down by the Hon'ble Supreme Court of India

and other courts rendering it liable to be dismissed in limine with exemplary

costs.

Page 12 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

32. The Respondent No. 7 submitted that, as a third party to the Corporate

Debtor, it cannot be subjected to proceedings under Section 66 of the Code. The

Respondent No. 7 contended that the Hon'ble Supreme Court of India in

Gluckrich Capital Pvt. Ltd. v. State of West Bengal [(2023 SCC OnLine SC

1187)] explicitly held that remedies against third parties are not available under

Section 66 of the Code, and civil remedies, if any, must be pursued independently.

33. The Respondent No. 7 submitted that the Interlocutory Application (IA)

No. 1626 of 2023 by the Resolution Professional was based solely on an

incomplete and inconclusive Forensic Audit Report dated 15.11.2021, which

cannot be relied upon. The Respondent No. 7 contended that the forensic report

lacks critical documents and does not conclusively categorize the transaction as

fraudulent, rendering it an unreliable basis for invoking Section 66 of the Code.

34. The Respondent No. 7 submitted that it neither knew nor could have known

of any prospect of the Corporate Debtor entering CIRP, as required under Section

66(2)(a). The Respondent No. 7 contended that, as an independent entity with no

role in the Corporate Debtor's affairs or management, it was not in a position to

anticipate insolvency proceedings. The Respondent No. 7 submitted that it is not

a related party to the Corporate Debtor as it is not involved in its business or

management.

35. The Respondent No. 7 submitted that the Adjudicating Authority's order

dated 02.04.2024, dismissing the said IA 1626 of 2023 in respect of Respondent

No. 7, is legally sound and based on a proper evaluation of the evidence.

Page 13 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

Concluding their pleadings, the Respondent No. 7 requested this Appellate

Tribunal to dismiss the appeal with costs.

36. The Respondent No. 8 i.e. C Bhansali Developers Private Limited,

submitted that the Appellants admit, at paragraph 7.8(II) of the appeal, that "there

are no documents available in the records of the Corporate Debtor to understand

the nature of the transaction as entered into between the Corporate Debtor and

C. Bhansali Developers Private Limited.", which demonstrates that the appeal is

based on surmises and conjectures, lacking any factual basis to substantiate

claims of a fraudulent transaction under Section 66 of the Code.

37. The Respondent No. 8 submitted that the transaction with the Corporate

Debtor involved an inter-corporate deposit of Rs. 8.98 Crores for the purchase of

property. The Respondent No. 8 further submitted that the transaction was an

investment to build an asset, with no accrual of interest or repayment terms,

distinguishing it from a loan transaction.

38. The Respondent No. 8 submitted that the write-off of Rs. 3.24 Crores on

01.01.2018 was a correction of an erroneous interest provision, as noted in the

Corporate Debtor's ledger with the remark "being excess provision for interest

now waived off." The Respondent No. 8 contended that this accounting

adjustment, made much before the CIRP admission, was a legitimate commercial

decision and not indicative of fraudulent intent.

39. The Respondent No. 8 submitted that the transaction's nature was an inter-

corporate deposit and not a fraudulent transaction under Section 66 of the Code,

Page 14 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

as the board resolution of Respondent No. 8 demonstrates that Respondent No. 2

(a suspended director of the Corporate Debtor) was also a director of Respondent

No. 8, actively managing the property's transactions, as reflected in the Corporate

Debtor's 2018-19 financial statements listing Respondent No. 8 as an associate.

Further, the Respondent No. 2, holding a 20% stake in Respondent No. 8,

consciously decided to retain the valuable asset (the property) rather than seek

repayment of the deposit, a decision that preserves the Corporate Debtor's

investment.

40. Concluding pleadings, the Respondent No. 8 requested this Appellate

Tribunal to dismiss the appeal with cost.

Findings

41. Heard the Counsel for the parties and perused the record available with us.

Shorn of unnecessary details, we note that the Corporate Debtor was initiated into

CIRP vide order dated 03.08.2020. The present Appeal has been preferred by the

Appellants, constituting 32.19% of voting share in the CoC, aggrieved by the

impugned order dated 02.04.2024 passed by the Adjudicating in IA No.

1626/2023 in CP(IB) No. 1632/MB/2019. We note from the pleadings of the

Appellant that the Adjudicating Authority failed to appreciate the fraudulent

nature of the transactions entered into by the Corporate Debtor with Respondent

Nos. 7 and 8 and erred in only partly allowing the Application filed by the

Resolution Professional under Section 66 of the Code.

Page 15 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

42. We note that during the CIRP, the Resolution Professional discovered

several suspicious transactions involving diversion of funds from the Corporate

Debtor to third-party entities without any alleged legitimate business purpose or

commercial justification and therefore, appointed BDO India LLP as forensic

auditor and the Forensic Audit Report dated 15.11.2021 identified four potential

transactions under Section 66 of the Code. The Adjudicating Authority vide the

impugned order partly allowed the I.A 1626/2023 and dismissed the I.A. qua the

two transactions in relation to Respondent Nos. 7 and 8 transactions.

43. We have taken note of relevant portion of the forensic auditor report dated

15.11.2021 which has been filed by the Appellant as Annexure/2 of the appeal.

44. We take into consideration that the Adjudicating Authority examined the

prayers of Resolution Professional and all four transactions purported to be

fraudulent based on forensic audit report of BDO India LLP dated 15.11.2024

and Resolution Professional's opinion.

45. At this stage, we will take into consideration the relevant portion of

Impugned Order which contains the finding of these four transactions in para 7.

46. We note that the Resolution Professional filed I.A. No. 1626 of 2023 before

the Adjudicating Authority under Section 66 of the Code for seeking direction

against the concerned respondents for seeking direction to said the respondent to

remit/ refund the amount in favour in Corporate Debtor along with interest @

18% p.a.

Page 16 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

47. At this stage, we note that the following prayer were made by the

Resolution Professional in his IA No. 1626 of 2023 dated 12.04.2023.

"In the premises and circumstances aforesaid, the Applicant most humbly prays for the following reliefs that are alternate to each other and without prejudice to each other:

a) Be pleased to allow the present Application;

b) Be pleased to pass an order u/s. 66 of the Code directing the Respondent Nos. 1, 5 to 9 to remit I refund the amount of INR 29.35 Crore along with interest @ 18% p.a. in the bank account of the Corporate Debtor to compensate the loss suffered by the Creditors of the Corporate Debtor with respect to Transaction No. 1;

c) Be pleased to pass an order uls. 66 of the Code directing the Respondent Nos. 2, 5 to 9 to remit I refund the amount of INR 2.65 Crore along with interest @ 18% p.a. in the bank account of the Corporate Debtor to compensate the loss suffered by the Creditors of the Corporate Debtor with respect to Transaction No. 2;

d) Be pleased to pass an order uls. 66 of the Code directing the Respondent Nos. 3. 5 to 9 to remit I refund the amount of INR 3.24 Crore along with interest @ 18% p.a. in the bank account of the Corporate Debtor to compensate the loss suffered by the Creditors of the Corporate Debtor with respect to Transaction No. 3;

e) Be pleased to pass an order uls. 66 of the Code directing the Respondent Nos. 4, 5 to 9 to remit I refund the amount of INR 1.22 Crore along with interest @ 18 % p.a. in the bank account of the Corporate Debtor to compensate the loss

Page 17 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

suffered by the Creditors of the Corporate Debtor with respect to Transaction No. 4.

f) Be pleased to pass an order to take necessary action against the Respondents under Section 66 of the Code;

g) Be pleased to grant any other relief this Hon'ble Tribunal may deem fit to pass."

(Emphasis Supplied)

48. It is worth noting that the Adjudicating Authority agreed to the prayers

made by Resolution Professional as far as transaction No. 2, involving Rs. 2.65

Crores along with interest @ 18% p.a., and in respect of transaction No. 4

involving Rs. 1.22 Crores along with interest @ 18% p.a.

However, the Adjudicating Authority rejected the prayer of the Resolution

Professional w.r.t to Transaction No. 1 involving Rs. 29.35 Crores along with

interest @ 18% p.a. as well as transaction No. 3 involving Rs. 3.24 Crores along

with 18% interest.

49. Thus, the present appeal is confined to the two alleged fraudulent

transactions i.e., Transaction No. 1 and 3 and as such, we shall deal with these

two transactions in the following discussions :-

50. Transaction No. I with M/s Dev Land & Housing Pvt. Ltd. (Respondent

No. 7 herein)

(i) It is noted that Rs. 29.35 Crores was given by the Corporate Debtor to

M/s Dev Land & Housing Pvt. Ltd./ Respondent No. 7 from 10.08.2015

Page 18 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

to 31.03.2016 against the intended purpose of buying the property as

mentioned in the MoU dated 18.08.2015.

(ii) We note that the entire amount was written off on 31.03.2020 in the

books of the Corporate Debtor and no evidence of any property ever

taken from Respondent No. 7 by the Corporate Debtor.

(iii) It has been brought to our notice that the transaction between the

Corporate Debtor and Respondent No. 7 has been based on an alleged

forged and unregistered MoU dated 18.08.2015, which was printed on

a Rs.100/- stamp paper and was neither registered nor notarized, which

intended to acquire immovable property valued at Rs. 75 Crores

without any registration. It has also been pleaded before us that the

said MoU lacks any payment schedule, and the signature of Mr. Praful

Satra, the suspended Director of the Corporate Debtor, is conspicuously

absent, thereby rendering the document suspicious from the very

inception and further the said MoU only mentions that the entire

payment should be paid in entirety on or before 31.08.2019, which is

four years from the date of alleged execution of the MoU dated

18.08.2015, which is not normal in commercial sense as payment

schedule in invariably stipulated as fulcrum of any MoU Agreement.

(iv) We observe that Clause 9 of the MoU seems to be one sided and entitles

only the Respondent No. 7 to forfeit the entire amount paid by the

Corporate Debtor without any possibility for dialogue or negotiation.

Page 19 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

Prima-facie, such clause defies any commercial logic as to why the

Suspended Director should agree to such one -sided arbitrary Clause

without taking care of the interest of the Corporate Debtor.

(v) We take into consideration that Rs. 29,35,00,000/- was paid by the

Corporate Debtor to Respondent No. 7 as an advance between

10.08.2015 to 31.03.2016, however, there has been no follow up or

communication from the Corporate Debtor seeking extension of time

or renegotiation on payment arrangements, or reduction of the

consideration by way of one-time settlement, in case Corporate Debtor

was facing financial distress. This become more significant since

almost 40% of the entire sale consideration has been paid as EMD,

which also seems to be exorbitant and excessive, looking at the overall

consideration value.

(vi) We further note that the Deed of Cancellation, dated 20.03.2020, was

executed without any opposition by the suspended Director. We note

that there was no Board Resolution either authorizing the transaction

or ratifying its cancellation, which again raises doubt about

genuineness of transaction and efforts of Corporate Debtor to protect

its own interest. It has been alleged by the Appellant that the said Deed

of Cancellation appears to be manufactured, fabricated and backdated

document, having allegedly been executed during the peak of the

COVID-19 pandemic. The Appellant also highlighted that the stamp

Page 20 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

paper on which the deed was signed was procured in 2019, whereas the

document itself bears the date of 20.03.2020, and the deed remains

unsigned by the Suspended Director, just like the MoU dated

18.08.2015 which suggests that both documents were created

harmoniously devoid of authenticity. The logic of the Appellant finds

merit in the given context, circumstances and final outcomes.

(vii) We observe that the Deed of Cancellation dated 20.03.2020 merely

mentions "extraneous reasons" for non-payment of the full

consideration by the Corporate Debtor but the said "extraneous

reasons" have not been elaborated in the Deed of Cancellation nor has

mentioned the same in any correspondence with Respondent No. 7

which gives credence that such documents have been doctored as an

afterthought with intent to defraud creditors. We also note that Rs.

29.35 Crores were forfeited in its entirely in terms of a forfeiture clause

(Clause 9 of the MoU dated 18.08.2015), but no attempt was made by

the suspended directors to negotiate upon the same and later the said

amount was completely written off on 30.03.2020. We need to

appreciate that the Section 7 petition had already been filed on

11.05.2019 and after the same amount was forfeited as agreed between

the Respondents, however, the impugned order erroneously records

that no CIRP was impending.

Page 21 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

(viii) We note that the parties are stated to be inter-se related by the common

directorship of Mr. Vijay T. Thakkar in Dev Land Housing Pvt. Ltd.

(the Respondent No. 7 herein) and Centrio Lifespaces Ltd. (formerly

Satra Realty and Builders Ltd.), which should have alarmed the

Adjudicating Authority before disallowing the request of the

Resolution Professional on this account.

(ix) The said forfeiture of the money by the Respondent No. 7 was done

taking shelter of Clause 9 "forfeiture clause as contained in the MoU

dated 18.08.2015. At this stage, we have also taken into consideration

the entire MoU dated 18.08.2015 and its various clauses especially

Clauses 4, 5 & 9. We have also seen and noted provision of Deed of

Cancelation dated 20.03.2020.

(x) We note that the Adjudicating Authority has treated this transaction as

commercial transaction treating the fact that the money was advance,

given by the Corporate Debtor for purchase of land and property which

the Corporate Debtor could not complete for want of non payment of

balance Operational Creditor payment to the Respondent No. 7. The

Adjudicating Authority has also taken into account the factor that the

MoU dated 18.08.2015 and deed of cancelation dated 20.03.2020 were

duly signed and therefore, the Adjudicating Authority concluded that

the transaction could be held to be falling within the scope of Section

66 of the Code. However, the Adjudicating Authority found that from

Page 22 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

the date of cancelation, Rs. 4.90 Crores is stated to be have been

refunded by Respondent no. 1 and was allowed to be set up against the

earnest money of Rs. 29.35 Crores and therefore, the Adjudicating

Authority has directed the Resolution Professional to find out whether

the said sum of Rs. 4.94 Crores was received by the Corporate Debtor

and if it was found to be received by the Corporate Debtor, then the

Resolution Professional was directed to make recovery of said amount

from the concerned Respondents.

(xi) Thus, we note that the crux of the matter lies in the structure of MoU

dated 18.08.2015 and deed of cancelation dated 20.03.2020, which

have been fully examined. It has been brought out that the total

consideration of the said property was Rs. 75 Crores against which the

EMD of Rs. 29.35 Crores was paid by the Corporate Debtor which

tantamount to almost 40% of the consideration value.

(xii) We take into consideration that the entire amount was requested to be

paid by the Corporate Debtor on or before 31.08.2019 and thereafter,

both the parties were required to execute the deed of conveyance in

respect of 66.66% undivided share, rights, title and interest of the

Respondent No. 7 in the said property in favour of the Corporate

Debtor. We also do not appreciate as to why the Corporate Debtor

agreed to take only 66.66% shares of undivided shares and not acquire

the entire 100% even when remaining 33.34% may be with someone

Page 23 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

else as without 100% of the said shares, the said property could not

have been put to use by the Appellant. This does not support the cause

and pleadings of the concerned Respondents.

(xiii) It is important to note that the MoU also stipulates that in case, the

Corporate Debtor is not able to make the payment within stipulated

time period, then Clause 9 will be applicable. The Clause 9 reads as

under:-

"Clause 9. Notwithstanding anything contained in this MOU, it is specifically agreed by and between the Parties hereto that if the Intending Purchaser fails to make payment of the entire Aggregate Consideration amount to the Intending Vendor on or before 31 51 August, 2019 , then the Intending Vendor shall be solely entitled to terminate this MOU at its discretion; and thereupon the Intending Vendor shall be entitled to forfeit all amounts till then paid by the Intending Purchaser to the Intending Vendor pursuant to this MOU and thereupon neither Party shall have any claim against the other. In such an event of termination , the Intending Purchaser shall not take any steps or initiate any proceedings against the Intending Vendor and the Intending Purchaser shall not claim any rights, title or interest in to or upon the said Property or otherwise against the Intending Vendor , either pursuant to this MOU or otherwise howsoever in relation to the

Page 24 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

transactions hereby contemplated ."

(Emphasis Supplied)

(xiv) From above, it seems that the Clause 9 gives an absolute right to the

Respondent No. 7, to terminate the MoU on its discretion and to forfeit

the entire amount paid by the Corporate Debtor by then. The Corporate

Debtor was also bound by MoU not to take any action for initiating any

proceedings against the Respondent No. 7 and further the Corporate

Debtor was also disentitled to file any claim for any right, title or

interest in the said property. We find that the said Clause 9 to be rather

unusual which gives unrestrictive and unfettered rights only in favour

of the Respondent No. 7. It needs to be appreciated that normally, when

commercial transactions takes place, the rights and obligations of both

the parties are clearly stipulated and evenly balanced and not made in

favour of any single party at the cost of other party.

(xv) We appreciate that it is commercial decision between the parties and

rightfully, the said MoU may include the Clause regarding forfeiture,

but normally such MoU also gives the right to the intending purchaser

(as the Corporate Debtor in the present case) which give some leeway

to the purchaser to negotiate. Such terms give some flexibility and this

could have facilitated the Corporate Debtor to preserve its rights, even

with higher interest rates or with pre-specified damages including

Page 25 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

liquidation charges. The termination of agreement and consequent

forfeiture is the last resort. We do not find such commercial elements

here taken by the Corporate Debtor rather find tame agreement in

favour of the Respondent No. 7.

(xvi) In this present case, we find that no efforts were made for any

negotiation, dialogue or any effort for rearranging the timelines or

reducing the said forfeiture amount or taking efforts to take over the

property by the Corporate Debtor. The reasons and circumstances of

the said default on the part of the Corporate Debtor have also not been

explained in details especially using terms "extraneous reasons", which

is not found to be convincing.

(xvii) This Appellate Tribunal is aware that every petition filed under section

7 of the Code and Section 9 or even under Section 94 and 95 and also

under Section 66 are strongly contested on substantial as well as

technical grounds. We observe that in contrast, the present case looks

like cake walk or complete surrender or giving on platter the forfeiture

of Rs. 29.35 Crores by the Appellants in favour of the Respondent No.

7, which raises doubts about intentions of the concerned Respondents

at the cost of the Corporate Debtor and its creditors, thus falling in

scope of Section 66 of the Code.

Page 26 of 31

Comp. App. (AT) (Ins.) No. 1043 of 2024

(xviii) We also find that the deed of cancelation also do not gives any rights

to the Corporate Debtor to protect itself by way of negotiation nor by

way of any legal proceedings.

(xix) Thus, on overall basis, we hold the transaction No. 1 falls squarely

under Section 66 of the Code and be treated as fraudulent.

(xx) We have also considered the contentions of the concerned Respondents

that Appellants do not constitute 100% of CoC. We hold that this is

not a requirement as stipulated in the Code or regulations, as such we

reject the pleadings of the Respondent on this ground.

51. Transaction No. 3 w.r.t. C. Bhansali Developers Pvt. Ltd.(Respondent No.

8 herein)

(i) Now, we will also examine the Transaction No. 3 with C. Bhansali

Developers Pvt. Ltd., where the impugned order concludes that the

transaction with Respondent No. 8 was "in the nature of an investment",

whereas the materials on record, especially the Ledger Account of M/s

C. Bhansali Developers Pvt. Ltd. in the books of the Corporate Debtor

describe the payment as "Interest Recd on Loan." This implies that the

transaction was more in nature of loan extended by the Corporate

Debtor, rather than in the nature of investment as found by the

Adjudicating Authority in its Impugned Order. It is also noted that there

is a common directorship of Mr. Praful Satra (Respondent No. 2) in C.

Bhansali Developers Pvt. Ltd., confirming that the decision to transfer

Page 27 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

funds might have been hit by conflict of interest and breach of fiduciary

duty.

(ii) It has also been brought out that C. Bhansali Developers Pvt. Ltd. is

the related party of the Corporate Debtor, which is not disputed.

(iii) The logic of the Adjudicating Authority while disallowing the request

of the Resolution Professional is that interest charge has been written

off as "excess provision of interest" and it was in nature of investment.

No more details are available to substantiate the facts or law for coming

to this conclusion by the Adjudicating Authority in the Impugned

Order. The Adjudicating Authority has merely recorded that we do not

find this transaction falling within the ambit of Section 66 of the Code.

During pleadings, it was brought out that no documents are available in

the records of the Corporate Debtor to understand the true nature of the

transaction as entered between the Corporate Debtor and C. Bhansali

Developers Pvt. Ltd. This also support the claims of the Appellants and

do not support finding of the Adjudicating Authority on this account.

(iv) It has also been brought out that C. Bhansali Developers Pvt.

Ltd.(Respondent No. 8 herein), the alleged beneficiary, is the related

party, the fact which has not been disputed. It is noted that the Corporate

Debtor on 31.03.2020 has written off the amount appearing in its

balance sheet after an application for initiation of CIRP against the

Corporate Debtor was filed. It further observed that the same was

Page 28 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

treated as excess interest without specific accounting details. As such,

we are of prima-facie opinion that the same is to fall in the ambit of

Section 66 of the Code.

(v) We do not find any merit in the contentions of the Respondents and also

do not find sufficient and strong logic in the Impugned Order to uphold

the Impugned Order. It is not clear that the transaction was done with

the related party, for which the amount which was rightfully

recoverable by the Corporate Debtor, then all of a sudden, the amount

was written off in the books of the Corporate Debtor. We note that no

detailed logic of disallowing the request of the Resolution Professional

in I.A. No. 1626 of 2023 has been recorded by the Adjudicating

Authority as seen in Para 7.7 of the Impugned Order. Thus, we are not

able to support the Impugned Order on this account as far as transaction

No. 3 is concerned.

(vi) We need to understand that Section 66 of the Code, 2016, does not

prescribe any specific "look-back period". The provision imposes a

duty upon the directors of the Corporate Debtor to exercise due

diligence and exercise its best business sense to minimizing any

potential losses to the Corporate Debtor its creditors. In the present case,

the conduct of the Suspended Director, Praful Satra, (the Respondent

No. 2 herein) does not inspire confidence to justify his actions as there

Page 29 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

is a glaring absence of due diligence and prudence in the discharge of

his responsibilities.

(vii) Section 66 of the Code is provided precisely to deal with such cases. It

is noted that the Resolution Professional duly authorised by the CoC

appointed forensic auditor i.e., M/s BDO India LLP, who gave its

detailed report on 15.11.2021 and clearly held that all four transactions

were fraudulent in nature. The Resolution Professional also gave its

opinion for the same. While dealing the Section 66 of the Code, the

intent of the parties become paramount and the courts/ tribunals are

supposed to look into fundamental aspects including the intention of the

parties, the structures or of the agreements, end objectives to identify

the methodology of fraudulent transactions, reckless indifference of the

Corporate Debtor in letting go its due money which may be done with

the intention to defraud its creditors.

(viii) Needless to say that it is always the duty of the directors of the

Corporate Debtor to act in the interest of the creditors and to take all

action to preserve the assets of the company.

52. We also reject the arguments of the Respondents for the transactions

pertaining to the period prior to two year of CIRP. We hold that there is no

restrictions on look back period for cases under Section 66 of the Code.

53. In fine, the appeal succeeds and the Impugned Order to the extent of

disallowing Transaction Nos. 1 & 3 w.r.t. the Respondent Nos. 7 & 8 respectively

Page 30 of 31 Comp. App. (AT) (Ins.) No. 1043 of 2024

is set aside. The original petition bearing in C.P. (I.B) No. 534/MB/2023 is

restored back. Both the parties are directed to appear before the Adjudicating

Authority on 16.07.2025, who shall take further action in accordance with law.

54. No cost. I.A., if any, are closed.

[Justice Rakesh Kumar Jain] Member (Judicial)

[Mr. Justice Mohammad Faiz Alam Khan] Member (Judicial)

[Mr. Naresh Salecha] Member (Technical) Sim

Page 31 of 31