IMPORTANT POINT
The principle of 'Clean Slate' protects new owners from liabilities of previous management, and banks must adhere to natural justice in fraud classifications.

ORDER :

(Vaibhavi D. Nanavati, J.) :

1. Issue RULE, returnable forthwith. Mr. A.S. Panesar, learned advocate waives service of Rule for and on behalf of the respondent – Bank.

2. Heard Mr. Mehul Sharad Shah, learned advocate appearing for the petitioner and Mr. A.S. Panesar, learned advocate appearing for the respondent – Bank.

3. By way of the present Petition, the petitioner herein has challenged the order dated 20.11.2023 (Annexure-C) passed by the respondent – Bank declaring the account of Vimal Oil & Foods Limited as a ‘fraud’ account. Being aggrieved by the said order, petitioner herein has preferred the present Petition and prayed for the following reliefs:

“(A) To issue a writ of mandamus and/or any other appropriate writ, order or direction quashing and setting aside the impugned order dated 20.11.2023 issued by respondent Bank declaring the account of VOFL as "fraud" pursuant to RBI Directions on Fraud dated 01.07.2016 (Annexure-C) and all further consequential steps/actions/measures holding the same as illegal, in violation of principle of natural justice and against the provisions of Section 32A of IBC Code, 2016;

(B) Pending admission, hearing and/or final disposal of this petition, Your Lordships may be pleased to restrain the respondent Bank from reporting the decision dated 20.11.2023 (Annexure-C), of declaring the account of VOFL as "fraud" to the Law Enforcement Agency for investigation and be further pleased to direct the respondent Bank to hold on all the steps and actions, if already initiated.

(C) Pending admission, hearing and/ or final disposal of this petition, Your Lordships may be pleased to stay the execution, implementation and operation of the impugned order dated 20.11.2023 (Annexure-C);

(D) To pass such other and further orders and relief as may be expedient and necessary in the circumstances of the case.”

4. 1. Mr. Mehul Sharad Shah, learned advocate appearing for the petitioner submits that the Vimal Oil & Foods Limited (for short ‘VOFL’) was admitted into Corporate Insolvency Resolution Process (CIRP) vide order dated 19.12.2017 by the Adjudicating Authority, National Company Law Tribunal, Ahmedabad Bench, Ahmedabad in a petition filed by Bank of Baroda under Section 7 of the Insolvency and Bankruptcy Code, 2016 (for short ‘the IB Code’) being CP (IB) No. 135 of 2017.

4.2. Mr. Mehul Shah, learned advocate submits that, as the Committee of Creditors (CoC) did not approve any resolution plan, the Adjudicating Authority on receipt of MA 17 of 2018 under Section 33 of the IB Code by the Resolution Professional, ordered liquidation of VOFL the Corporate Debtor vide order dated 19.12.2019. The Liquidator of the VOFL – Corporate Debtor issued Invitation For Expression of Interest (EOI) to sell the Corporate Debtor as a going concern together with all connected licenses, permissions, trademarks, patents, registrations, formulations and property rights in accordance with the provision of IBC, 2016 and rules made there-under.

4.3. Mr. Mehul Shah, learned advocate submits that, in response to the invitation for EoI, M/s. Arrhum Tradelink Private Limited – petitioner herein, submitted an EoI dated 11.11.2020 alongwith all requisite documents as required by the liquidator. On 04.12.2020, the e-auction was convened, wherein, the offer of M/s. Arrhum Tradelink Private Limited was found to be the highest for purchasing the Corporate Debtor, viz. Vimal Oil & Foods Limited, as a going concern and it was declared as successful bidder. Thereafter, M/s. Arrhum Tradelink Private Limited have already paid total consideration amount of Rs.69.95 Crores to the Liquidator and the Liquidator has also distributed the sale proceeds to all consortium member banks including the respondent bank.

4.4. Mr. Mehul Shah, learned advocate submits that, the Liquidator thereafter executed a sale agreement dated 03.03.2021 in favour of Arrhum Tradelink Private Limited thereby selling the Corporate Debtor, viz. Vimal Oil & Foolds Limited, as a go