Bank of India and Ors. Vs. S.M. Kamal Pasha and Ors. - Read together, we are of the opinion that the withdrawal of an application can only be till the CoC approves the plan and after it is placed before the Adjudicating Authority, there can be no withdrawal either of the application or the approved Resolution Plan.

  SCI (2026.10.26) in Bank of India and Ors. Vs. S.M. Kamal Pasha and Ors.  [(2026) ibclaw.in 764 SC, Civil Appeal No. 12045 of 2026] held that; 

• The resolution plan even prior to the approval of the adjudicating authority is binding inter se the CoC and the successful resolution applicant. The resolution plan cannot be construed purely as a “contract” governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the adjudicating authority. Even at that stage, its binding effects are produced by IBC framework.

• The binding effect of the resolution plan has the consequence of preventing the CoC or the resolution applicant to renege from its terms after the plan has been approved by the CoC through a voting mechanism.

• It was also noticed in paragraph 223 that, ‘the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-approved resolution plans, at the behest of the successful resolution applicant’ (sic) nor does it provide such a framework at the behest of the CoC.

• Read together, we are of the opinion that the withdrawal of an application can only be till the CoC approves the plan and after it is placed before the Adjudicating Authority, there can be no withdrawal either of the application or the approved Resolution Plan.

• Hence the binding nature of the Resolution Plan was upheld even in Kalyani Transco and the finding that the CoC continues to exist till the Resolution Plan is implemented, does not detract from the essential binding nature of a Resolution Plan, approved by the CoC.

• The consideration has to be with a satisfaction entered of the Resolution Plan meeting the requirements of Section 30(2), as is mandated by Section 31(1) which shall be after verifying the financial position of the CD, as of now, together with the cash balance juxtaposed with the terms of the resolution plan. The improved profitability alone cannot be a reason to refuse approval if the Resolution Plan meets the requirements under sub-section (2) of Section 30

• We make it clear that except on the binding nature of the Resolution Plan, vis-a-vis the CoC and the SRA, as already upheld by this Court, we have only made prima facie observations which need not govern the final adjudication by the NCLT.

Excerpts of the order;

Whether the Committee of Creditors (CoC), after approving the Resolution Plan by a majority, as provided under the Insolvency and Bankruptcy Code, 2016 (IBC), can seek withdrawal of the same before the Adjudicating Authority (AA), the National Company Law Tribunal (NCLT); on grounds of delay, not attributable to the Successful Resolution Applicant (SRA) but on the plea that the financial position of the Corporate Debtor (CD) has improved considerably, is the vexing question posed.

# 2. The NCLT allowed the withdrawal filed by the Resolution Professional (RP), on it being approved by the CoC unanimously. The plea taken by the CoC before the NCLT was that the CD’s financial position having improved in the ensuing years, when the RP was in management, the SRA would have a windfall gain in having to bring in a lot less than that stipulated in the Resolution Plan. The erstwhile promoters of the CD, their holding company, also support the withdrawal of the Resolution Plan; but on different grounds with a different consequence. They seek that the CIRP process itself be abandoned since they are willing to offer a One-Time Settlement (OTS) to the creditors. The members of the CoC along with the RP seeks for issuance of a fresh Form-G; a new invitation of Expression of Interest (EoI). The SRA opposes both prayers referring to the binding nature of the Resolution Plan, insofar as the CoC and the SRA are concerned.

# 3. The National Company Law Appellate Tribunal (NCLAT) found the withdrawal application to be in violation of the provisions of the IBC, especially referring to Ebix Singapore (P) Ltd. v. Committee of Creditors of Educomp Solutions Ltd. and Another [(2022) 2 SCC 401] and State Bank of India and Others v. Consortium of Murari Lal Jalan and Florian Fritsch and Another [(2025) 4 SCC 354]. The NCLAT held that the CoC has no jurisdiction to decide on withdrawal of the Resolution Plan. It was found that the earlier proceedings before this Court; the stay granted in which, occasioned the delay in implementation of the plan, permitted the appellant therein, the erstwhile promoter, the holding company to make all such pleas before the Adjudicating Authority. The NCLAT while rejecting the application filed by the RP on behalf of the CoC to withdraw the approval to the Resolution Plan, revived the application filed by the RP for confirmation of the Resolution Plan; IA No.1505 of 2021 for consideration by the NCLT. IA No.1679 of 2025 filed by the holding company, the 4th respondent herein was also directed to be considered. The SRA too was permitted to raise their contentions.

# 4. The appeal is filed by the members of the CoC, six in number of which the 1st appellant is the applicant under Section 7 of the IBC; the financial creditor, who initiated the CIRP against the CD. The 1st and 2nd respondents together, as a consortium had submitted the Resolution Plan, which was approved by the CoC, the consortium referred to herein as the SRA. The 3rd respondent is the RP, and the 4th respondent is the holding company of the CD.

# 5. The appellants are represented by Mr.Gopal Sankarnarayan, learned Senior Counsel who points out that the original proposal in the Resolution Plan was of a resolution amount of Rs.172.55 crores, when the CD had an opening balance of Rs.30 crores. However, by the time this Court in the earlier proceedings dismissed the SLP filed by the erstwhile promoter, the opening balance has risen up to Rs.165 crores; which confers a windfall gain on the SRA. Since the fresh infusion of funds by the SRA would be considerably reduced, according to him, this would violate the governing principles of CIRP, under the IBC, which is the maximization of value of the assets of the CD inter alia inuring to the benefit of the creditors. Here, the creditors would be benefited if the Resolution Plan is withdrawn, since they would also be entitled to much more than that offered in the haircut by the Resolution Plan. At the time of submission of the Resolution Plan and its approval by the CoC, the CD’s financial position was tottering since its business of toll collection in the National Highway 45 had taken a beating due to the Covid-19 pandemic. It is trite that the commercial wisdom of the CoC is given primacy under the IBC and this is a fit case where the Resolution Plan should be withdrawn. Reliance is also placed on Kalyani Transco v. Bhushan Power & Steel Ltd. [(2026) 6 SCC 431] to canvass the proposition that the CoC’s existence does not end with the approval of the plan and survives throughout the implementation, till the disbursals as per the plans are fructified.

# 6. Mr. Nidhesh Gupta, learned Senior Counsel appearing for the SRA, on the other hand, heavily relied on the judgment in Ebix Singapore (P) Ltd. to contend that the CoC is bound by the approval granted of the Resolution Plan and neither can the SRA wriggle out of its obligation, for reason of the CD’s financial position having further deteriorated nor can the CoC withdraw from its commitment to abide by an approved Resolution Plan, for reason of the financial position of the CD having improved. It is pointed out that the improvement in the financial position was already contemplated in the Resolution Plan, and in any event, if the SRA was handed over the CD, within the timelines provided under the IBC, the revenue generated would have gone into the coffers of the SRA without any additional benefit being conferred on the members of the CoC. The CoC’s request would go against the basic principles enshrined in IBC and any permission granted for withdrawal of the approved Resolution Plan, at the behest of the CoC would result in shifting stances by the financial creditors only looking at a better settlement; which cannot necessarily be said to be an expression of commercial wisdom.

# 7. Mr. Nikhhil Nayyar, learned Senior Counsel appearing for the 4th respondent, the holding company and the sole promoter of the CD points out that if the sanctioned OTS, as affirmed by the CoC is implemented, then everybody would gain and, in that circumstance, the CIRP itself can be closed and the CD on its revival would remain a profitable cash surplus going concern. In fact, the submission is that the Company’s present financial position not only supports its exit from the CIRP but there is also a feasible alternative of discharging the admitted creditors’ balance in full, in addition to the OTS. This Court, in the earlier round had specifically directed consideration of the holding company’s request, which is now before the NCLT by IA No.1679 of 2025.

# 8. Ebix Singapore (P) Ltd.  considered the request of three SRAs in three different CIRPs. The appeal by Ebix dealt with the withdrawal sought for by the SRA on the ground of investigation initiated against the misconduct in the affairs of Educomp, the CD, prior to the commencement of the CIRP. It was found that the SRA would be immune from any prosecution or punishment and the contention that it is placed in a prejudicial position due to the investigation into the affairs of the CD by CBI and the SFIO, was merely a red herring. Insofar as the Seroco’s appeal is concerned, the contention of frustration of contract due to the economic slowdown, impacting the value of assets, was rejected on the ground of common law remedies not being available to render the Resolution Plan voidable on account of frustration, force majeure, or other such instances. However, in the Kundan Care’s appeal since both the Resolution Applicant and the CoC together requested for modification of the Resolution Plan because of the uncertainty over the Power Purchase Agreement (PPA), cleared by the decision of this Court, a one-time relief under Article 142 of the Constitution was provided. The SRA, in this case specifically argues against the invocation of Article 142 on the facts of this case.

# 9. Ebix Singapore (P) Ltd. considered three stages, on an overview of the CIRP procedures; the first, prior to and ending with the approval of the Resolution Plan by the CoC; the second, the interim period between the approval of the CoC and the confirmation by the Adjudicating Authority; and the third, after the Adjudicating Authority approves the Resolution Plan. Therein the period which came up for consideration was the second stage as is the situation in the present case, i.e. between the approval of the CoC and confirmation by the NCLT. Elaborately considering the source of the binding nature of the Resolution Plan; whether it be the IBC or the law of contracts, it was held as under: -

• 113…… In the pure contractual realm, an agreement binds parties who are privy to the contract. In the context of a resolution plan governed by IBC, the element of privity becomes inapplicable once the adjudicating authority confirms the resolution plan under Section 31(1) and declares it to be binding on all stakeholders, who are not a part of the negotiation stage or parties to the resolution plan. In fact, a commentator has noted that the purpose of Bankruptcy law is to actually solve a specific “contracting failure” that accompanies financial distress…… It was also held that: -

• 115….…….the resolution plan even prior to the approval of the adjudicating authority is binding inter se the CoC and the successful resolution applicant. The resolution plan cannot be construed purely as a “contract” governed by the Contract Act, in the period intervening its acceptance by the CoC and the approval of the adjudicating authority. Even at that stage, its binding effects are produced by IBC framework.

# 10. It was categorically held, ‘that ability of the Resolution Plan to bind those who have not consented to it, by way of a statutory procedure, indicates that it is not a typical contract’. Dilating upon Section 30(4) which requires only 66% vote for an approval of the Resolution Plan, it was noticed that even the dissenting creditors are bound by the Resolution Plan, by virtue of the statutory provisions. It was held that:

• 112….…. Other elements governing the resolution plan indicate that the entire process from initiation and leading up to its acceptance by the CoC takes place within the framework of IBC. In addition, IBC provides penalties for non-compliance with the resolution plan after its approval under Section 31 and forfeiture of the PBG for failing to implement the resolution plan or contributing to the failure of its implementation. The violation of the terms of the resolution plan does not give rise to a claim of damages, rather it leads to prosecution and imposition of punishment under Section 74 IBC. On the contrary, a CoC's withdrawal of the CIRP under Section 12-A is coupled with a requirement of payment of CIRP costs, but no damages are statutorily payable to the  resolution applicant, irrespective of the stage of the withdrawal.

It was categorically held that: -

• 116….….The binding effect of the resolution plan has the consequence of preventing the CoC or the resolution applicant to renege from its terms after the plan has been approved by the CoC through a voting mechanism……

# 11. Reference was also made to Section 12A and Regulation 30A and it was held so: -

• 131… ….. Further, in the event that the CoC enters into a settlement with the corporate debtor and withdraws from the CIRP under Section 12-A, Regulation 30-A provides for only payment of insolvency costs and not compensation or damages to the resolution applicant for investing time and money in the process. The parties may resort to invoking principles of frustration or force majeure to evade implementation of the resolution plan leading to unnecessary litigation. This Court in Amtek Auto [Amtek Auto Ltd. (CoC) v. Dinkar T. Venkatasubramanian (2021 )4 SCC 457, had curbed a similar attempt by a successful resolution applicant who had relied on a force majeure clause in its resolution plan to seek a direction compelling the CoC to negotiate a modification to its resolution plan. The Court held that there was no scope for negotiations between the parties once the resolution plan has been approved by the CoC.

# 12. It is apposite also to refer to paragraph 156.2 which is extracted herein: -

• 156.2. In Uttara Foods [Uttara Foods & Feeds (P) Ltd. v. Mona Pharmachem (2018) 15 SCC 587, this Court had granted a one-time relief under Article 142 of the Constitution since all the parties were present before it and had presented it with signed consent terms. This course of action, in refraining from the exercise of inherent powers to effect procedures and remedies that were not specifically envisaged by the statute, was explicitly affirmed by the Insolvency Law Committee Report dated March 2018 [ Pages 5 and 101, Report of the Insolvency Law Committee, Ministry of Corporate Affairs (March 2018) available at <https://ibbi.gov.in/uploads/resources/ILRReport2603_0304 2018.pdf> last accessed 20-8-2021.] which proceeded to suggest amendments to IBC and recommended a ninety per cent voting threshold by the CoC for withdrawals of a CIRP and a specific amendment to Rule 8 of the then existing CIRP Rules to enable parties to file such applications. This report led to the insertion of Section 12-A which vested the CoC with the power to withdraw the CIRP or vote on such withdrawal, if sought by the corporate debtor. This provision was introduced with retrospective effect on 6-6-2018. Significantly, no such exit routes have been contemplated for the resolution applicant. It is relevant to note that the newly inserted and then unamended Regulation 30-A (w.e.f. 4-7- 2018) of the CIRP Regulations stipulated that withdrawal under Section 12-A can be allowed through submitting an application to the IRP or RP (as the case may be) before the invitation for EoI is issued to the public. The CoC was to consider the application within seven days of its constitution and an approval for such application required approval of the ninety per cent of the voting share of the CoC.

# 13. As has been reiterated in Ebix Singapore (P). Ltd. based on the binding precedents of this Court, the Adjudicating Authority, the NCLT, cannot second guess the commercial wisdom of the parties or direct unilateral modification to the Resolution Plan. When there is no clear legal provision, by a process of interpretation, no power can be conferred on the Adjudicating Authority to direct an unwilling CoC to renegotiate a submitted Resolution Plan or agree to its withdrawal at the behest of the Resolution Applicant. The direction to re-consider has to be only to ensure compliance under Section 30(2) IBC, before exercising its powers of approval or rejection under Section 31 was the categoric finding.

# 14. We have to observe that Ebix Singapore (P) Ltd. though was in the specific context of withdrawal/modification sought of the approved Resolution Plan, by the SRA, which approval was placed before the Adjudicating Authority for confirmation, the dictum applies squarely to the CoC too. It was also noticed in paragraph 223 that, ‘the existing insolvency framework in India provides no scope for effecting further modifications or withdrawals of CoC-approved resolution plans, at the behest of the successful resolution applicant’ (sic) nor does it provide such a framework at the behest of the CoC.

3 15. Section 12-A introduced with retrospective effect, on the face of it, read alone, gives a carte blanche to the applicant, with approval of 90% voting share of the CoC to seek withdrawal of an application. Regulation 30-A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 incorporated simultaneous to Section 12A, seemingly restricts the power to withdraw, permitting it only; before the constitution of the CoC, through the IRP or, after the constitution of the CoC, thorough the IRP or the RP, as the case may be. The proviso also makes it abundantly clear that if an application is made under Clause (b) after the issue of invitation for EoI under Regulation 36A, the applicant shall state the reasons justifying withdrawal after issuance of such invitation. Inferentially cannot be deemed to be a curtailment of the power under Section 12-A, which in any case is not within the domain of the rule making authority.

# 16. Glas Trust Company LLC v. Byju Raveendran & Others [(2024) SCC Online 3032], held that, with the introduction of Section 12-A and Regulation 30- A an exhaustive procedure is laid down for withdrawal of applications under Sections 7/9/10 which could be sought for at four stages; 

• (i) before admission of the application, where the applicant could directly approach the AA, then, 

• (ii) after admission and before the CoC is constituted, when the application to withdraw has to be filed through the IRP and again,

• (iii) after the CoC is constituted and before the EoI is received, through the IRP or the RP and finally, 

• (iv) after the EoI is received, with the same procedure as at the third instance, however with sufficient reasons for having moved at that belated stage. But the question still remains as to whether the remedy would remain alive after the CoC approves the resolution plan.

# 17. The legislative scheme does not permit Section 12-A to be read in isolation. Section 31 with the nominal heading, ‘Approval of Resolution Plan’ postulates the satisfaction of the Adjudicating Authority, as to the Resolution Plan approved by the CoC under Section 30(4), meeting the requirements of sub-section (2) of Section 30. Sub-section (2) of Section 30 ensures that the IRP cost is paid in priority to the other debts of the CD in the manner specified by the Board and more importantly, that the creditors of the CD obtain the higher of the amounts, as indicated in sub- clauses (i) and (ii). That is; either the amount to be paid under Section 53 to the creditors in the event of liquidation or the amount specified for distribution under the Resolution Plan in accordance with the order of priority in sub-section (1) of Section 53; whichever is higher. Read together, we are of the opinion that the withdrawal of an application can only be till the CoC approves the plan and after it is placed before the Adjudicating Authority, there can be no withdrawal either of the application or the approved Resolution Plan.

# 18. We cannot also but notice Explanation I to Section 30 (2), which clearly requires that there should be a fair and equitable distribution to the creditors in accordance with the provisions of this clause which also is a question to be considered while the confirmation of an approved plan is taken up and decided by the Adjudicating Authority, the NCLT. We would further buttress this position with a reference to Explanation II to Section 30 which stipulates that the provisions of sub-section (2) brought in by the IBC (Amendment) Act, 2019 apply to every Resolution Plan which has not been approved or rejected by the Adjudicating Authority; which is the situation in the above case.

# 19. In this context we also extract paragraph 224 of Ebix Singapore (P) Ltd.1 which reckoned the possibility of long delays:-

• 224. It would also be sobering for us to recognize that whilst this Court has declared the position in law to not enable a withdrawal or modification to a successful Resolution Applicant after its submission to the Adjudicating Authority, long delays in approving the resolution plan by the adjudicating authority affect the subsequent implementation of the plan. These delays, if systemic and frequent, will have an undeniable impact on the commercial assessment that the parties undertake during the course of the negotiation…...

# 20. Referring to the despondent state of affairs, as revealed from a Report of the Standing Committee on Finance (2020-21) of the Ministry of Corporate Affairs, regarding delay in implementation, it was observed: -

• The delays were attributable to: (i) the NCLT taking considerable time in admitting CIRPs; (ii) late and unsolicited bids by Resolution Applicants after the original bidder becomes public upon passage of the deadline for submission of the Plan; and (iii) multiplicity of litigation and the appellate process to the NCLAT and the Supreme Court.

Here the delay was occasioned because of the stay granted by this Court.

# 21. Kalyani Transco accepted the proposition that CoC has a vital interest in the Resolution Plan, and such an interest would continue till the Resolution Plan is actually implemented, since only on its implementation payments can be made to the creditors in accordance with the Resolution Plan. There, one of the questions raised was the delay in implementation of the Resolution Plan, as permitted by the CoC, challenged by the promoter as beyond the ken of the CoC, especially since it had become functus officio on the plan having been approved by the AA. This Court specifically noticed Regulation 18 of the Insolvency and Bankruptcy Board of India (IBBI) (CIRP) Regulations which by sub-regulation (2) enable the RP to convene a meeting if he considers it necessary on a request received from the Members of the Committee representing at least 33% of the voting rights. While the explanation clarifies that such meetings may be convened under the sub-regulation till the Resolution Plan is approved under sub-section (1) of Section 31 or order on liquidation is passed under Section 33, it also provides a rider that the decision in such meeting shall not affect the Resolution Plan submitted before the AA. This was specifically referred, to find that on approval of the Resolution Plan, the CoC does not become functus officio, and it is empowered to decide all matters, except matters which affect the Resolution Plan submitted before the AA (sic-para 109). It was also held that the CoC has a vital interest in the Resolution Plan which interest would continue till the Resolution Plan stands actually implemented (sic-para 110).

# 22. In fact, in Kalyani Transco, the Resolution Plan was approved by the CoC on 15.10.2018 and the RP submitted it for approval to the AA on 14.02.2019. However, there were several impediments in the implementation of the Resolution Plan by the SRA, which included investigation against the erstwhile promoters, attachments of the properties of the CD and so on and so forth. Despite all these on 17.02.2020, the NCLAT approved the Resolution Plan of the SRA by modifying/clarifying some of the conditions imposed by the NCLT and later the CoC by a resolution passed on 26.02.2021 by a majority of 97.25% voters provided that the SRA shall implement the Resolution Plan on or before 31.03.2021 and the SRA implemented the Resolution Plan by paying the amounts due to the financial creditors of the CD. This Court also found that the Resolution Plan by Clause 3.1 provided for an effective date, which shall not exceed 30 days from NCLT approval date or such extended period, which may be permitted by 66% majority of the lenders forming part of the CoC. It was held that Clause 3 of the Resolution Plan neither provided modification or withdrawal from the Resolution Plan and it was not an open-ended or indeterminate plan, solely at the discretion of the resolution applicant. There was neither a provision for withdrawal or modification of the Resolution Plan nor was any negotiation emphasized under the said clause. Hence the binding nature of the Resolution Plan was upheld even in Kalyani Transco and the finding that the CoC continues to exist till the Resolution Plan is implemented, does not detract from the essential binding nature of a Resolution Plan, approved by the CoC.

# 23. As of now, two applications are pending before the NCLT, one for the approval of the Resolution Plan and the other filed by the holding company for implementation of an OTS, thus, bringing to an end the very CIRP. As has been held in Ebix Singapore (P) Ltd.1 in considering the said applications, the NCLT would necessarily have to keep in mind that even under Section 12A, if the CoC by a 90% majority consents to withdrawal of the plan, the consequence is only the payment of CIRP costs by the CoC. However, the consequences of SRA not implementing an approved plan would be onerous insofar as forfeiture of PBG and prosecution under Section 74 of the IBC. In the present case, the PBG has been furnished by the SRA long back and the same is being continued with considerable expenses which would not be defrayed by the provisions of the IBC if no approval is granted to the Resolution Plan.

# 24. The compelling contention raised by the appellants is that the authoritative pronouncements of the NCLT, being disabled from second guessing the commercial wisdom of the CoC in approving a plan with 66% majority, squarely applies in the present instance where the CoC unanimously is in favour of a fresh Form-G being issued. The ground of feasibility of revival by itself and the possibility of defeating the very principle of maximisation of assets of the CD, which is the bedrock of IBC, requires a consideration by the NCLT. Insofar as the commercial wisdom, we should also reckon the contention of the SRA that the financial turnabout for the good, was contemplated even in the Resolution Plan and if the SRA was handed over the CD, the future generation of income from the operations of the CD, would have inured to the benefit of the SRA. The SRA’s contention that the CoC has turned turtle not because of its commercial wisdom but only due to a shortsighted opportunism revealing institutionalized rapacity also cannot be ignored.

# 25. We would not interfere with the impugned order which though found the CoC to have no jurisdiction to withdraw from its approval, but all the same directed every contention raised by the SRA and the CD’s holding company to be considered by the Adjudicating Authority, while deciding the application filed for confirmation of the approval of the CoC and the application filed by the holding company for putting an end to the CIRP itself. The consideration has to be with a satisfaction entered of the Resolution Plan meeting the requirements of Section 30(2), as is mandated by Section 31(1) which shall be after verifying the financial position of the CD, as of now, together with the cash balance juxtaposed with the terms of the resolution plan. The improved profitability alone cannot be a reason to refuse approval if the Resolution Plan meets the requirements under sub-section (2) of Section 30 We make it clear that except on the binding nature of the Resolution Plan, vis-a-vis the CoC and the SRA, as already upheld by this Court, we have only made prima facie observations which need not govern the final adjudication by the NCLT.

# 26. We hence request the applications directed to be considered by the NCLT to be taken up together and a decision rendered as expeditiously as possible, reckoning the delay already occasioned.

# 27. The appeal stands disposed of.

# 28. Pending application(s), if any, shall stand rejected.

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Kamal Kishor Gurnani vs Mr. Sushil Sahani & Ors. - In our considered view, the deeming fiction in terms of Section 43 of the Code has been enacted to preserve and protect the total corpus available to the creditors of Corporate Debtor during look back period and the beneficial treatment resulting from a payment made to any creditor during such look back period has to be determined after taking into consideration of receipt of money from such creditor during such look back period also.

  NCLT Mumbai (2025.11.06) in Kamal Kishor Gurnani vs Mr. Sushil Sahani & Ors. [(2025) ibclaw.in 2563 NCLT, [IA 238 of 2023 in CP (IB) 3923/MB/C-1/2019] held that; 

• In our considered view, the deeming fiction in terms of Section 43 of the Code has been enacted to preserve and protect the total corpus available to the creditors of Corporate Debtor during look back period and the beneficial treatment resulting from a payment made to any creditor during such look back period has to be determined after taking into consideration of receipt of money from such creditor during such look back period also.

• Nonetheless, as it is case of applicant that such payment by R1 on behalf of Corporate Debtor was made to R3 without approvals and justification, we consider it appropriate to set aside accounting to said transaction in the books of accounts, thereby, the balances due to R1 & R3 shall be re-stated in the books of Corporate Debtor accordingly.

• Accordingly, the payments made to R1 for discharge of liabilities on behalf of Corporate Debtor can not be impugned as fraudulent to the extent such payments are verifiable from the records.

Excerpts of the order;

# 1. This Application IA 238/2023 was filed by Mr. Kamal Kishore Gurnani (“Applicant/RP”), the Resolution Professional of Pranav Construction Systems Private Limited (“Corporate Debtor”) in the Corporate Insolvency Resolution Process (“CIRP”) thereof under Section 43, 44 and 66 of the Insolvency and Bankruptcy Code, 2016 (“Code”), seeking following reliefs:-

• 1. To declare Transaction No. 1 as Preferential Transaction in terms Section 43 of the Code, and direct Respondent No. 2 for reversal of the amount of INR 6.75 Lacs to the Corporate Debtor as per Section 44 of the Code;

• 2. To declare Transaction No. II as Preferential Transaction in terms Section 43 of the Code, and direct Respondent No. 3 for reversal of the amount of INR 11.90 Lacs to the Corporate Debtor as per Section 44 of the Code;

• 3. To declare Transaction III as Fraudulent Transaction in terms of Section 66 of the Code, and direct Respondent No. 5 to pay an amount of INR 1189.96 Lacs to the Corporate Debtor;

• 4. To declare Transaction IV as Fraudulent Transaction in terms of Section 66 of the Code, and direct Respondent No. 6 to pay an amount of INR 276.32 Lacs to the Corporate Debtor;

• 5. To declare Transaction V as Fraudulent Transaction in terms of Section 66 of the Code, and direct Respondent No. 4 to pay an amount of INR 1189.96 Lacs to the Corporate Debtor;

• 6. To declare Transaction VI as Fraudulent Transaction in terms of Section 66 of the Code, and direct Respondent No. 1 to pay an amount of INR 465.41 Lacs to the Corporate Debtor;

• 7. Any other order which this Hon’ble Tribunal may find fit in the facts and circumstances of the present case.

# 2. The Applicant is a Resolution Professional of the Corporate Debtor having office address at 101, 1st Floor KanakiaAtrium-2, Cross Road ‘A’, Chakala MIDC, Andheri (E), Mumbai 400059. This Tribunal admitted the Corporate Debtor in CIRP process vide order dated 11.03.2022 (“Insolvency Commencement Date“) appointing the Applicant herein as the Interim Resolution professional (“IRP”) of the Corporate Debtor to carry out the functions as per the provisions of the Code, who was subsequently confirmed as Resolution Professional.

# 3. The Respondent No. 1 to Respondent No. 4 are the Erstwhile Directors/Promoters and Employee of the Corporate Debtor (hereinafter referred to as “Erstwhile Management of the Corporate Debtor”) and Respondent No. 5 is the Subsidiary Company of the Corporate Debtor, whereas Respondent No. 6 is related Company of the Corporate Debtor with whom certain transactions impugned in the present application were carried out.

# 4. As per Section 13 of the Insolvency and Bankruptcy Code 2016 read with Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons), Regulation 2016 a public announcement was made by the IRP on 13th March 2022 in Financial Express and Navakal (Marathi) of Mumbai edition, and Committee of Creditors (“CoC”) was constituted.

# 5. The Applicant appointed NV Dand & Associates as the Transaction Auditors to the Corporate Debtor (“Transaction Auditor“), who conducted the transaction audit for the period starting from 11th March 2020 till 11th March 2022 (hereinafter referred to as “Transaction Audit Period”) in order to identify transactions which are Preferential, Undervalued, Defrauding, Extortionate and Fraudulent as per the provisions of the Code. The Transaction Auditor submitted its transaction Audit Report dated 21 November 2022 (“Transaction audit Report”) to the Applicant.

# 6. Based upon the expert opinion provided by the Transaction Auditor in the Transaction Audit Report, the RP came to a conclusion that there were several transactions which were either Preferential and Fraudulent in nature. The applicant has impugned following transactions for declaration thereof as Preferential or Fraudulent in terms of Section 43, 44 and 66 of the Code.

• a. Repayment of unsecured loan of INR 6.95 Lakhs to Mrs. Sunanda Sushil Sahani (R2) as preferential payment u/s 43 of the Code;

• b. Repayment of unsecured loan of INR 11.90 Lakhs to Shreya Sahani (R3) as preferential payment u/s 43 of the Code;

• c. Siphoning of funds of INR 1,189.96 Lakhs through its subsidiary Pranav Framework & Engg. (FZC) (R5) as Fraudulent in terms of Section 66 of the Code;

• d. Payment to 3rd Party Vendors/suppliers of INR 276.32 Lakhs through Prasham Construction and Engineering Pvt Ltd (R6) as Fraudulent in terms of Section 66 of the Code;

• e. IOU Debt of INR 170.18 Lakhs owed by the Corporate Debtor to Mr. Pranav Sahani (R4) as Fraudulent in terms of Section 66 of the Code; and

• f. IOU Debt of INR 465.41 Lakhs owed by the Corporate Debtor to Mr. Sushil Sahani (R1) as Fraudulent in terms of Section 66 of the Code.

# 7. The Respondents have filed their reply, thereafter, the Applicant filed his rejoinder. An additional affidavit was also filed by the Applicant, to which the Respondents have also filed their response.

# 8. Heard the Counsel and perused the material on record.

# 9. Though, the applicant has filed combined application for impugning the transactions u/s 43 and 66 of the Code, however, the facts relating to each of these transactions and its nature i.e. preferential or fraudulent has been distinctly stated in the application. We will examine each of these transactions in the following para in the light of findings of the Applicant and the response thereto provided by the Respondents in relation to each of these transactions.

Transactions u/s 43 of the Code

# 10. Section 43 Section 43 is a deeming fiction which contemplates avoidance of transaction in nature of payments to persons within look back period (which is 2 years in case of related persons and 1 years in other cases) to the creditors in respect of antecedent debt owed to such creditors, if such payments results into preference to them over other creditors in case such payments would have been made in terms of Section 53 of the Code in the event of liquidation. However, section 43(3) of the Code saves transactions entered into ordinary course of business or financial affairs of the Corporate Debtor from this deeming fiction.

# 11. Repayment of unsecured loan of INR 6.95 Lakhs to Mrs. Sunanda Sushil Sahani (R2) as preferential payment u/s 43 of the Code :

a. It is not in dispute that there was an antecedent debt payable to the R2 as on commencement of look back period, which is two years as the R2 being a related person. R2 has claimed that there was total debt of Rs. 34.28 Lakhs as due from the Corporate Debtor, out of which a sum of Rs. 6.95 lakhs was withdrawn to meet urgent requirement of funds for higher education of her daughter. The Applicant has stated the total debt due as Rs. 16.23 Lakhs, nonetheless, existence of antecedent debt is not in question. It is also not in dispute that such withdrawal by R2 has resulted into a preference in repayment of debt due to him by the Corporate Debtor over other creditors had such payment would have received in terms of Section 53 of the Code.

b. The R2 has submitted that a sum of Rs. 25.00 Lakhs was once again paid Rs 25,00,000 (Rupees Twenty Five Lakh only) on 22.10.2021 as unsecured loan (Second Loan from Respondent No.2) for day today operational requirement of the Corporate Debtor and the Applicant has conveniently suppressed this fact. The applicant has not stated the date of withdrawal of this sum of Rs. 6.75 Lakhs, however, the Transaction Auditor has reported such withdrawal during the period from 1.4.21 to 11.3.2022. The Applicant disputed the explanation offered by R2 on ground that no evidence has been annexed in support of his defense, which was placed by R2 in his response to the additional affidavit. It is noted from the R2’s response to additional affidavit filed by the Applicant, that the fees was paid on 13.01.2022, meaning thereby the amount was withdrawn from Corporate Debtor around that time only. It is pertinent to note that the applicant has, even after being told about payment of Rs. 25.00 Lakhs on 22.10.2021 by Respondent No. 2 to Corporate Debtor for its day today operational requirement, has chosen not to rebut the same, has consistently pleaded its case as if the payment of Rs. 6.75 Lakhs was made from the antecedent debt payable as on commencement of look back period. If we consider the facts of the case in totality, R2 had paid a sum of Rs. 25.00 Lakhs to the Corporate Debtor as fresh loan and withdrawn Rs. 6.75 Lakhs during such period, thus, R2 has given additional debt of Rs. 18.25 Lakhs during the look back period to the Corporate Debtor. In these circumstances, it can not be said that the withdrawal of Rs. 6.75 Lakhs to R2 resulted into putting R2 in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53 .

c. In our considered view, the deeming fiction in terms of Section 43 of the Code has been enacted to preserve and protect the total corpus available to the creditors of Corporate Debtor during look back period and the beneficial treatment resulting from a payment made to any creditor during such look back period has to be determined after taking into consideration of receipt of money from such creditor during such look back period also. Accordingly, we do not find any merit in the prayer of applicant in relation to this transaction, as it does not fall within scope of Section 43 of the Code.

# 12. Repayment of unsecured loan of INR 11.90 Lakhs to Shreya Sahani (R3) as preferential payment u/s 43 of the Code :

a. It is not in dispute that there was an antecedent debt payable to the R3 as on commencement of look back period, which is two years as the R3 being a related person.

b. It has been explained by R3 that she is daughter of R1 & R2 and the loan advanced by her to the Corporate Debtor in on 28.2.2018 with an understanding that the same shall be repaid to her when she would be in need of the same, however, there is no evidence on record to substantiate the same. It is further explained that when she required money for her higher education, the aforesaid loan was partly paid by the Corporate Debtor through the Respondent No.1 via bank transfer in four tranches: (i) Rs 1,00,000 (Rupees One Lakh only) on October 26, 2020; (ii) Rs 40,000 (Rupees Forty Thousand only) on October 26, 2020; (iii) Rs 3,50,000 (Rupees Three Lakh Fifty Thousand only) on January 20, 2021; and (iv) Rs 7,00,000 (Rupees Seven Lakh only) on February 11, 2021 respectively totalling to Rs 11,90,000 (Rupees Eleven Lakh Ninety Thousand only).

# 13. The Applicant has submitted in additional affidavit that the said amount of INR 11.90 lacs is now showing to be owed to Mr. Sushil Sahani by the Corporate Debtor and, without any proper justification or relevant approvals, the amount of INR 11.90 Lacs was transferred by Erstwhile Management of the Corporate Debtor to Ms. Shreya Sahani. This response clearly shows that the payment was not made from the Corporate Debtor’s account, but was made by R1 from his personal account on behalf of Corporate Debtor. In case, it is case of the Applicant that such payment was made without any proper justification or relevant approvals, he ought to have sought setting aside credit to the account of R1 and debit to the account of R3, but in no case, this payment from R1 could held to be a transaction resulting into putting R3 in beneficial position from the account of Corporate Debtor. Nonetheless, as it is case of applicant that such payment by R1 on behalf of Corporate Debtor was made to R3 without approvals and justification, we consider it appropriate to set aside accounting to said transaction in the books of accounts, thereby, the balances due to R1 & R3 shall be re-stated in the books of Corporate Debtor accordingly.

Transactions u/s 66 of the Code

14. Section 66 of the reads as under :

“Section 66: Fraudulent trading or wrongful trading.

*66. (1) If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit.

(2) On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that a director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit, if—

(a) before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reasonable prospect of avoiding the commencement of a corporate insolvency resolution process in respect of such corporate debtor; and

(b) such director or partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor.

(3) Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under subsection (2), in respect of such default against which initiation of corporate insolvency resolution process is suspended as per section 10A.

Explanation.—For the purposes of this section a director or partner of the corporate debtor, as the case may be, shall be deemed to have exercised due diligence if such diligence was reasonably expected of a person carrying out the same functions as are carried out by such director or partner, as the case may be, in relation to the corporate debtor.”

# 15. Section 66 of the Code has two limbs i.e. (i) carrying of business of the corporate debtor with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, and (ii) exercise due diligence in minimising the potential loss to the creditors while knowing absence of reasonable prospect of avoiding the commencement of a corporate insolvency resolution process.

# 16. Siphoning of funds of INR 1,189.96 Lakhs through its subsidiary Pranav Framework & Engg. (FZC) (R5) as Fraudulent in terms of Section 66 of the Code :

a. It is stated by the Applicant that the Erstwhile Management of the Corporate Debtor has tried to siphon of the amount of INR 1189.96 lacs through its subsidiary Pranav Formwork & Engg. (FZC), Respondent No. 5; the outstanding dues receivables from the Respondent No. 5 as on 12.03.2020 was of INR 1,501.28 Lacs out of which INR 722.98 Lacs were categorized into doubtful recovery by the Erstwhile Management of the Corporate Debtor; and the same amount of receivable was carried forward in F.Y. 2020 – 2021, wherein the total receivable from Respondent No. 5 Company was of the same i.e., INR 1,501.28 Lacs, however, during the F.Y. 2020-2021 the Erstwhile Management of the Corporate Debtor categorized INR 1,189.96 lacs (i.e., approx. 80% of the said receivable) as a doubtful recovery from Respondent No. 5 Company. It is alleged that the Audited Financials of the said subsidiary, the supporting documents such as necessary approval from the Board of Directors related records, efforts made for such doubtful recoveries and legal action taken against the parties was not provided by the Erstwhile Management of the Corporate Debtor, and neither they have reported such details in the audited accounts of the Respondent No. 5 Company. It is alleged that such transaction was carried by the Erstwhile Management of the Corporate Debtor is transaction with an intent to defraud the creditors of the Company or for any fraudulent purpose.

b. The Respondent (R5) through Mr. Sushil Sahani (R1) has explained that R5 was considering the rental business model for ongoing Infra Projects in Middle east countries, however due to economic shut down the desired rental income could not be realised as a result of which R5 was unable to pay back to the Corporate Debtor. It is further explained that it could not repay the Corporate Debtor owing to non-receipt of outstanding dues amounting to INR 3.5 crores from its customer, M/s. Simplex Infrastructure Limited, which itself is undergoing CIRP proceedings. Further, the amount has ballooned on account of devaluation of Indian rupees on account of re-statement of receivables from R5 in Indian currency at end of each financial year due to prescription in the Accounting Standards.

c. The Transaction Auditor has quoted the response of Suspended Board which reads as “CR: Due to cash flow situations all the staff working for M/s. PFE has left the organisation also the trade license could not get renewed, and subsequently no business / sales has been generated post year 2016. The copies of audited balance-sheet has been already shared with IRP”.

d. Indubitably, the financial results of R5 being its subsidiary were required to be consolidated in the audited financial statements of the Corporate Debtor in terms of Companies Act, 2013. The Applicant has not averred whether it was done so or nor and has also not rebutted the claim of Respondents as noted by the Transaction Auditor in their report that the audited financial statements of subsidiary company were given to IRP and R5’s trade license in UAE has been cancelled. On perusal of the pleadings in the application, it is noted that neither the Transaction Auditor nor the Applicant has disbelieved the explanation offered by Respondent that the said balance was built up out of exports made to R5 in FY 2008-09 and FY 2014-15. However, it is pertinent to note that the Corporate Debtor have been acknowledging the amounts due from R5 as recoverable till March 2020, whereat only a sum of Rs. 722.98 crore was reported as doubtful. However, the initial transaction of exports made to R5 can not been doubted as the same was duly accounted for in books of Corporate Debtor and accepted by its auditors as well. Accordingly, it can not be said that the business of the Corporate Debtor was carried out with an intent to defraud its creditors or for any fraudulent purpose in so far as this transaction is concerned.

e. The Applicant has sought contribution from R5 in relation to this transaction, which in our considered opinion is still recoverable from them as terming the said balance as doubtful of recovery does not take away right of a creditor to recover the said amount from the debtor. However, it is pertinent to note that R5 is a registered legal entity in UAE and its trade license is reported to have been cancelled. The Applicant has not carried out any due diligence as to whether it still exists or what was its financial position as per latest available financial statement or as incorporated in consolidated financial statements of Corporate Debtor.

f. In view of these facts, we consider it appropriate to direct the applicant to carry out further inquiry in the affairs of R5 and take necessary steps to recover the said outstanding from it. Needless to say, R5 shall furnish necessary information to the Applicant and pay the amounts due from them. Further, R1 and R2 shall assist the Applicant in his effort for recovery of said amount, which is recoverable from R5.

# 17. Payment to 3rd Party Vendors/suppliers of INR 276.32 Lakhs through Prasham Construction and Engineering Pvt Ltd (R6) as Fraudulent in terms of Section 66 of the Code;

a. It is stated that R6 made several payments amounting to INR 276.32 Lacs on behalf of the Corporate Debtor. The Transaction Auditor has summarized the account of R6 in books of Corporate Debtor as follows :

b. The Applicant has listed out in the application the details of the payments made by the Respondent No. 6 on behalf of the Corporate Debtor for aggregate sum of Rs. 276.32 Lakhs, the details of which are given below :

c. It was explained by the Respondent that GST component was debited by it to the Corporate Debtor on account of non payment of GST charged but not paid and not filed, in spite of release of payment to the Corporate Debtor, as the said amount was recovered by GST department in annual audit exercise on account of inadmissible GST input credit due to non payment by Corporate Debtor. The Corporate Debtor was debited for supplies directly made to customer of Corporate Debtor i.e. RCC Infra Ventures Ltd., as the Corporate Debtor could not effect supplies to it in view blockage of Eway bill generation utility of the Corporate Debtor on account of default in payment of GST liability necessitating direct supply to it at the request of Corporate Debtor who had already received 100% payment against such supplies from RCC Infra Ventures Ltd. Further, Rs. 1.00 Lakhs was paid to Pro-arc Welding and Cutting Systems Pvt. Ltd. was made for supplies of Welding Rods for fabrication work to continue the work, which otherwise was in scope of Corporate Debtor. Besides this, Rs. 30.00 lakhs was debited on account of adjustment of one advance for purchase of laser machine from it, which was requested by Corporate Debtor to be supplied to it against settlement of this amount towards their running bills due from R6. The statutory payments were made to statutory authorities, who was contractor for works for the project of R6 in view of default on its part to discharge the same, accordingly, these amounts were recovered from it. A sum of Rs. 11.64 Lakhs was debited against the material supplied to Kanakia Spaces, which in turn was supplied by Corporate Debtor to R6. Since this transaction was agreed to be carried out between Corporate Debtor and Kanakia, the said debit has the effect of reversal of earlier credit in books of R6 on account of purchase from Corporate Debtor.

d. On perusal of the details of credits given to R6 on account of various transactions involving Corporate Debtor with such third parties, it is noted that these credits given to R6 have been explained in details, which in our considered view, can not held to be fraudulent in nature or have been done with intent to defraud the creditors of the Corporate Debtor.

e. In view of this none of the credit can not be held to be fraudulent so as to warrant an order of contributions from R6 as prayed.

# 18. IOU Debt of INR 170.18 Lakhs owed by the Corporate Debtor to Mr. Pranav Sahani (R4) as Fraudulent in terms of Section 66 of the Code :

a. It is stated by the Applicant that Mr. Pranav Sahani (R4), related party of the Corporate Debtor was also in employment with the Corporate Debtor and the Corporate Debtor has remitted INR 154.09 Lakhs, besides debited his account by INR 16.09 Lakhs through Journal Voucher (“JV”). The Transaction Auditor has summarized the transactions in its Report as follows :

b. It is explained by the Respondent that it is a matter of record that the banks through which all banking transactions were done earlier had stopped allowing operation of any transactions, thereby forcing the Corporate Debtor to transact through cooperative banks, which did not have net banking facility. Thus, in order to take care of statutory dues payment and other critical payments, the Corporate Debtor routed the payment through Respondent No. 1 and Respondent No. 4.

c. The Applicant has listed out in the application the details of the payments made by the Respondent No. 4 on behalf of the Corporate Debtor for aggregate sum of Rs. 135.02 Lakhs, the details of which are given below :

d. On perusal of which it is evident that more than 95% of payments stated therein pertains to payment to statutory authorities. Such details substantiate the explanation offered by the Respondent, however, the Applicant has disputed this explanation stating that essential supporting documents such as approval of board of directors authorizing such payments, copies of personal bank account statements of R4 reflecting the alleged payments, confirmation/ no dues certificates obtained from the creditors of the Corporate Debtor to whom such payments are stated to be made have not been furnished. We find such objection meritless as discharge of such statutory liabilities are verifiable from the books of Corporate Debtor itself or GST/TDS/ESI/PF portals where at the details of amounts due from an entity and its discharge are available. Accordingly, the payments made to R4 for discharge of liabilities on behalf of Corporate Debtor can not be impugned as fraudulent to the extent such payments are verifiable from the records.

e. It is alleged that the Corporate Debtor had remitted a sum of Rs. 154.09 Lakhs to R4, and has credited his account by Rs. 135.02 Lakhs. However, it is also noted from the statement provided in Transaction Audit report that a sum of Rs. 37.45 Lakhs was received back from R4. Further, a payment of Rs. 16.00 Lakhs is stated to be made by R1 to R4 which is debited to R4’s account by journal voucher. If we consider these amounts in totality, a sum of Rs. 170.09 Lakhs was paid to R4, against which a sum of Rs. 135.02 Lakhs was paid to Corporate Debtor and a sum of Rs. 37.45 Lakhs was returned to it through Banking channel. Accordingly, as against payment of Rs. 170.09 Lakhs, a sum of Rs. 172.47 Lakhs stands appropriated for and on behalf of Corporate Debtor. Accordingly, no money was paid from the account of Corporate Debtor.

f. The Applicant has contended that the documents furnished by R4 with affidavit in reply to additional affidavit are presented in a haphazard manner, without any proper bifurcation, reconciliation or supporting to arrive at INR 170.18 Lakhs, accordingly, we consider it appropriate to direct R4 to provide a statement showing each payment made on behalf of Corporate Debtor with person to whom it is paid and map such details with the corroborating evidence supplied by him in response to additional affidavit. After this exercise, the Applicant shall account for such payments as credit to R4 and determine what is still receivable from R4 on this account. Needless to say, if there is debit balance recoverable from R4, the same shall be paid by R4 without any further delay.

# 19. IOU Debt of INR 465.41 Lakhs owed by the Corporate Debtor to Mr. Sushil Sahani (R1) as Fraudulent in terms of Section 66 of the Code :

a. It is stated by the Applicant that the Corporate Debtor has remitted significant amount of INR 443.11 Lacs to its Director, Mr. Sushil Sahani, Respondent No. 1 and has also debited his account by INR 22.30 Lacs through Journal Voucher (“JV”) during the Transaction Audit period. The Transaction Auditor has summarized the transactions in its Report as follows :

b. It is explained by the Respondent that the amount in question has been paid towards Statutory Dues like GST Dues, TDS Dues, PF, ESIC, MPCB Fees and towards repayment of bank dues under OTS scheme as the Corporate Debtor was not having net banking facility so to take care of statutory dues payment and other critical payments, the Corporate Debtor routed the payment through Respondent No. 1 and Respondent No. 4.

c. The Applicant has listed out in the application the details of the payments made by the Respondent No. 1 on behalf of the Corporate Debtor for aggregate sum of Rs. 434.02 Lakhs, the details of which are provided in the application as below :

d. On perusal of which it is evident that more than 90% of payments stated therein pertains to payment to statutory authorities. These details substantiate the explanation offered by the Respondent, however, the Applicant has disputed this explanation stating that essential supporting documents such as approval of board of directors authorizing such payments, copies of personal bank account statements of R1 reflecting the alleged payments, confirmation/ no dues certificates obtained from the creditors of the Corporate Debtor to whom such payments are stated to be made have not been furnished. We find such objection meritless as discharge of such statutory liabilities are verifiable from the books of Corporate Debtor itself or GST/TDS/ESI/PF/Banks portals whereat the details of amounts due from an entity and its discharge are available. Accordingly, the payments made to R1 for discharge of liabilities on behalf of Corporate Debtor can not be impugned as fraudulent to the extent such payments are verifiable from the records.

e. It is alleged that the Corporate Debtor had remitted a sum of Rs. 443.11 Lakhs to R1, and has credited his account by Rs. 22.30 Lakhs. However, it is also noted from the statement provided in Transaction Audit report that a sum of Rs. 29.24 Lakhs was received back from R4. Further, a payment of Rs. 22.30 Lakhs was debited to R1’s account by journal voucher. If we consider these amounts in totality, a sum of Rs. 465.41 Lakhs was paid to R1, against which a sum of Rs. 434.02 Lakhs was paid on behalf of the Corporate Debtor and a sum of Rs. 29.24 Lakhs was returned to it through Banking channel. Accordingly, as against payment of Rs. 465.41 Lakhs, a sum of Rs. 463.26 Lakhs stands appropriated for and on behalf of Corporate Debtor. Accordingly, only a sum of Rs. 1.15 Lakhs stands unappropriated.

f. The Applicant has contended that the documents furnished by R1 with affidavit in reply to additional affidavit are presented in a haphazard manner, without any proper bifurcation, reconciliation or supporting to arrive at INR 465.41 Lakhs, accordingly, we consider it appropriate to direct R1 to provide a statement showing each payment made on behalf of Corporate Debtor with person to whom it is paid and map such details with the corroborating evidence supplied by him in response to additional affidavit. After this exercise, the Applicant shall account for such payments as credit to R1 and determine what is still receivable from R1 on this account. Needless to say, if there is debit balance recoverable from R1, the same shall be paid by R4 without any further delay.

# 20. In terms of above, IA 238 of 2023 is partly allowed and disposed of accordingly. 

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