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2024 Supreme(Online)(NCLT) 3943
NATIONAL COMPANY LAW TRIBUNAL
Shri. Kuldip Kumar Kareer, Member Judicial, Shri. Anil Raj Chellan, Member Technical
Mr. Kailash T. Shah, Resolution Professional of Corporate Debtor – Appellant
Versus
Mr. Shantilal Karamshi Patel – Respondent
Interlocutory Application No. 1893 of 2023 | Company Petition (IB) No. 4563 (MB)/2019
For the Applicant: Adv. Aniruth Purusothaman
For the Respondent: Adv. Devarajan Raman
The purchase of a car registered in a director's name using corporate funds was deemed fraudulent, constituting wrongful trading under the Insolvency and Bankruptcy Code.
Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 66 and 67 - Application for directions against suspended directors for fraudulent and wrongful trading - The Corporate Debtor purchased a car in the name of a director for personal use while using company funds - Court rejected director's claim of the car being a perquisite due to lack of evidence. (Paras 1-14)
(B) Fraudulent Transactions - Elements of proof - The Tribunal outlined that establishing intent in fraudulent transactions involves examining factual circumstances under Section 66. (Para 11)
Facts of the case:
The Resolution Professional filed an application concerning a BMW car purchased for a director's personal use using company funds, raising allegations of fraudulent trading and wrongful trading against suspended board members.
Findings of Court:
The tribunal found the car purchase and payments constituted a fraudulent transaction without business purpose, imposing liability on the director for the amount paid by the Corporate Debtor.
Issues: The main issues pertained to whether the transaction constituted fraudulent trading under Section 66 of the Code and if the director's claim for perquisite was valid.
Ratio Decidendi: The court concluded that the director failed to provide sufficient evidence to substantiate the claim of the car as a perquisite and the transaction was found to defraud creditors due to improper use of Corporate Debtor's funds.
Result: Application allowed; Director ordered to pay Rs. 38,88,679/- to the Corporate Debtor.
| Table of Content |
|---|
| 1. application filed for directions against directors for fraudulent trading. (Para 1 , 2) |
| 2. respondent claims vehicle was a perquisite; evidence disputed. (Para 3 , 4 , 5 , 6 , 7 , 9 , 10) |
| 3. court noted lack of evidence for director's claims. (Para 8) |
| 4. court established fraudulent transactions under the insolvency code. (Para 11 , 12) |
| 5. national company tribunal mandates payment by the director. (Para 13 , 14) |
ORDER
Per: Coram.
1. The instant Interlocutory Application is filed by the Applicant/Resolution Professional of Jaatvedas Construction Company Private Limited under Section 66 and 67 of the Insolvency and Bankruptcy Code, 2016 (‘IB Code’) seeking directions against the Respondents for indulging in Fraudulent Trading and Wrongful Trading transaction thereby causing actual loss to the Corporate Debtor and its Creditors. The details of the concerned transaction are elaborated in this Application.
2. The Facts of the case leading to the filing of this application are briefly stated as under:
i. The Applicant is the Resolution Professional of Jaatvedas Construction Company Private Limited i.e. the Corporate Debtor, having his address as mentioned in the cause-title hereinabove. Respondent No.01 was a director of the Corporate Debtor on the date when BMW Car (Vehicle No. MH 03 CQ 1010) was bought by the Corporate Debtor on 14.03.2017. All other respondents are the members of the suspended board of directors of the Corporate Debtor.
ii. Jaatvedas Construction Company Private Limited is a Company incorporated on 10.02.2011 under the erstwhile Companies Act, 1956 and is engaged in the business of civil and building contracting in India. The Operational Creditor viz. Ultratech Cement Limited filed an Application bearing Company Petition No.4563 of 2019 under Section 9 of the Code, which came to be admitted on 16.09.2022 initiating Corporate Insolvency Resolution Process (‘CIRP’) of the Corporate Debtor and Mr. Sitansh Mangia was appointed as the Interim Resolution Professional (‘IRP’) of the Corporate Debtor. Thereafter, public announcement of CIRP was made by the IRP inviting claims from the creditors and after receiving, verifying and collating the claims, the IRP constituted the Committee of Creditors (‘CoC’). In the 2nd CoC Meeting held on 02.11.2022, the CoC, by a majority, passed a resolution, inter- alia, to appoint the Applicant herein as the Resolution Professional (‘RP’) of the Corporate Debtor. The Tribunal vide Order dated 06.01.2023 in IA No. 23/2023 in the above-captioned Company Petition, passed an order confirming the appointment of the Applicant as the RP of the Corporate Debtor.
iii. Respondent No.01 was appointed as a Director of the Corporate Debtor with effect from 25.02.2011. Respondent No.01 is also a shareholder of the Corporate Debtor holding 5,45,400 shares or 26.22% voting power as per the audited financial statements as on 31st March, 2017.
iv. The Corporate Debtor purchased an automobile viz. BMW Car (Vehicle Registration No.MH 03 CQ 1010) (hereinafter referred to as the "Car") for the personal use of Respondent No.01 and the Car was registered in the name of Respondent No.01 on 01.04.2017. The purchase of the Car was financed from BMW Financial Services Private Limited under Customer ID CT00038446 and Loan Account No. CN0013370 with a total loan amount of Rs.55,11,960/-. The Amortization Schedule provided by BMW Financial Services for the Car states that the loan amount, provided by BMW Financial Services Private Limited, would be paid in 60 (sixty) Equal Monthly Instalments ("EMI") with the due date for the 01st EMI being 01.04.2017 and the due date for the last EMI being 16.03.2022. The purchase of the Car is reflected as an addition in 'Motor Vehicle' in Note 2.10 - Fixed Assets in the Audited Financial Statement of the Corporate Debtor as at 31.03.2017. the Corporate Debtor has made a total payment of Rs.38,88,679/- during FY 2017- FY21 comprising a principal amount of Rs.28,21,211/- and
