Sh. Ashish Chaturvedi & Anr Vs. Sh. Sanjay Garg - In IA No 1253 of 2020, the resolution professional had sought directions under Section 19(2) for the suspended board of directors for providing the record and other information of the Corporate Debtor. After hearing in detail, the adjudicating authority, on 9/11/2020 ordered that both directors of the CD namely Ashish Chaturvedi and Sanjay Kapoor have grossly violated the provisions of Section 128(5) of the Companies Act 2013, for which the punishment is provided under Section 128(6) of Companies Act 2013. Invoking the provisions under Section 128(6) of the Company Act 2013, the adjudicating authority imposed a penalty of Rs 5,00,000 on each namely Mr Ashish Chaturvedi and Mr Sanjay Kapoor.

  NCLAT (2025.04.23) in Sh. Ashish Chaturvedi & Anr Vs. Sh. Sanjay Garg [Company Appeal (AT) (Insolvency) No. 432 & 433 of 2025] held that;

• In IA No 1253 of 2020, the resolution professional had sought directions under Section 19(2) for the suspended board of directors for providing the record and other information of the Corporate Debtor. After hearing in detail, the adjudicating authority, on 9/11/2020 ordered that both directors of the CD namely Ashish Chaturvedi and Sanjay Kapoor have grossly violated the provisions of Section 128(5) of the Companies Act 2013, for which the punishment is provided under Section 128(6) of Companies Act 2013. Invoking the provisions under Section 128(6) of the Company Act 2013, the adjudicating authority imposed a penalty of Rs 5,00,000 on each namely Mr Ashish Chaturvedi and Mr Sanjay Kapoor.

• “ . . . . . .Moreover, it would have served the cause of natural justice if the Appellants were given an opportunity to be heard before imposition of any penalty. Chapter VII of the IBC which lays down “Offences and Penalties” under which officers of the Corporate Debtor can be penalized and/or punished with imprisonment is relevant in this regard.

• 13. In the light of the above, we direct that the case be remanded to the Adjudicating Authority for taking a decision under the provisions of IBC after giving an opportunity to the Appellants to present their case and giving due consideration of the facts of the case in IA 1253/2020.”

Blogger’s Comments; It's a very interesting case. Here the RP files application under section 19(2) of the Code (IBC,2016), but Hon’ble Adjudicating Authority went ahead and imposed a penalty under The Companies Act. Thank God AA had not imposed a penalty under Cr.P.C. or PMLA  etc. etc. Even for imposing a penalty for an offence under IBC, only special courts are authorised under section 236. 

NCLAT observed that section 66 application of the Liquidator was decided by Hon’ble AA, without giving an opportunity to the respondent (applicant herein) to be heard, but went ahead in declaring that AA order dated 09.11.2021 had attained finality.

Excerpts of the order;

The Appellants-Suspended Directors of A to Z Barter Pvt Ltd, have challenged the Order dated 16.01.2025 passed by the National Company Law Tribunal, New Delhi (Adjudicating Authority-AA) in I.A. No. 2021/2022 in CP (IB) No.643(ND)/2018]. The Impugned Order directed the Appellants to deposit Rs 37,64,953/- (including interest on Rs 32,00,000/-) into the Liquidation Estate of the Corporate Debtor. The amount was allegedly withdrawn during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Appellants contend that the withdrawal was the result of the encashment of post-dated cheques issued to Kewal Kisan, prior to the initiation of the CIRP. They argue that the transaction was cheque-based and not through electronic transfer (NEFT/IMPS), and that the post-CIRP, presentation of the cheques was not their fault. Accordingly, they seek to set aside the Impugned Order through the present Appeal.

Brief facts

# 2. It is claimed by the Appellant that the Impugned Order dated 16.01.2025 is silent upon the ground taken by the present Appellant on the contention of the Respondent Liquidator regarding illegally withdrawing an amount of Rs 32,00,000/- from the Corporate Bank account while the said Corporate Debtor was under CIRP and Section 14 of the IBC was imposed upon the same. The AA failed to appreciate that the Appellant had issued post-dated cheque to Kewal Kisan for repayment of loan. If we scrutinise the bank statement, which was annexed with the Application vide IA No. 2025 of 2020 filed by the Ex-Interim Resolution Professional, we can see that it’s a transaction through cheque and not a transfer through NEFT. The cheque was given earlier as a post-dated cheque to repay the due loan amount. The Appellant never used that money for his personal purpose. The AA has overlooked the legal issues that the money was neither an NEFT transaction nor a cash withdrawal but it was repaid through post-dated cheques to repay an old loan amount on behalf of the Company. The AA has wrongly relied on the version of pleadings of the Respondent Liquidator.

# 3. The Appellant contends that AA has failed to appreciate that, after passing of the Order/Judgment dated 14.02.2022, of this Appellate Tribunal in Company Appeal (AT) (Ins) 1103 of 2020, IA 1253/2020 ought to have been heard afresh after giving due opportunity to the Appellant to present his case. However, the Respondent Liquidator, with delay tactics and an intention to prolong the liquidation period of the Corporate Debtor for an indefinite period, recklessly filed another round of litigation through IA 2021 of 2022 with no objective other than again accusing the Appellant/ex-directors of the Corporate Debtor of non-cooperation despite the fact that the liquidation period had already been extended on multiple instances. In IA 2021 of 2022, the operative part of the Judgment/Direction passed on 14.02.2022 by this Appellate Tribunal in Company Appeal (AT) (Ins) No. 1103/2020, i.e, “directions to the Adjudicating Authority to hear afresh the IA 1253 of 2020“, was concealed and, subsequently, the same was also not reflected in the Impugned Order dated 12.03.2024 passed by the AA, which was a gross misconduct on behalf of the Respondent Liquidator, and against which appropriate proceedings must be initiated to safeguard the purpose of the liquidation element of the IBC.

# 4. The Appellant prays to set aside the impugned Order dated 16.01.2025 passed by the NCLT, New Delhi Bench in (IB)-643(ND)/2018 whereby the application IA No. 2021 of 2022 filed by Respondent Liquidator was allowed and Mr. Ashish Chaturvedi and another suspended Director Mr. Sanjay Kapoor, of the Corporate Debtor were directed to deposit Rs 37,64,953/- (Rupees Thirty-Seven Lakh Sixty-Four Thousand Nine Hundred Fifty-Three) including interest accrued on the actual amount of Rs 32,00,000/- to make it a part of Liquidation estate of the Corporate Debtor.

# 5. The Respondent-Liquidator claims that the Appellants in both the Appeals are hit by the Doctrine of Res Judicata. It was in this context that IA 2021/2022 was preferred by the Liquidator.

# 6. At this juncture, it is pertinent to submit that CA 1253/2020 was preferred during the CIRP stage. The purpose of filing IA 2021/2022 was to bring to the knowledge of the AA, the fact of continuing non-cooperation of the Appellants as well as the brazen disobedience of the Appellants vis-à-vis Orders passed by the AA and this Appellate Authority qua wrongful utilisation of Rs 32 lakhs during the CIRP moratorium. The IA 2021/2022 was heard and was decided by the Impugned Order dated 16.01.2025. The Appellants had shown non-cooperation during the CIRP and during the liquidation process, and the same is continuing as on date. The Appellants-Suspended Directors in both the Appeals shown abject non-cooperation during the CIRP and liquidation process. The Respondent-Liquidator claims that none of the documents as required by the Liquidator/Respondent have been provided by the Appellants hitherto.

# 7. Vide Order dated 09.11.2021 of the AA in the Application [IA 2025/2020], filed by the Resolution Professional under Section 60 (5), read with Section 66 of the Code, the suspended directors of the Corporate Debtor (Appellants) were directed to deposit a sum of Rs 32 lakhs along with interest @12% per annum from the date of withdrawal.

# 8. Thereafter, the suspended board of directors had preferred an Appeal [CA (AT) (Ins) No. 47/2021] before this Appellate Authority. However, the said Appeal was dismissed as withdrawn vide Order dated 29.01.2021 of the Appellate Authority.

# 9. As the Corporate Debtor had no money to its credit as on the liquidation commencement date because of the malicious acts of the Respondents, the Respondent-Liquidator was unable to pay fees either to himself or to the service providers appointed by him.

# 10. The only plea that has been taken by the Appellants to rebut the allegation of abject non-cooperation is illness of the Appellants, which cannot be held tenable in law.

# 11. Copies of the Impugned Orders were served to the Appellants (also through the Counsel) for necessary compliances via emails dated 17.01.2025, and other reminder emails. Also, the Orders were served to the Appellants via letters dated 06.02.2025. However, the Orders were disobeyed by the Appellants. The Respondent has filed Contempt Petition No. 10 of 2025 against the Appellants for they have knowingly disobeyed the Orders of the AA as well as Orders/Judgments of this Appellate Authority. The Contempt Petition was called for hearing on 18.03.2025 and the AA was pleased to issue notice. In view of the submissions made hereinabove, the Appeals are liable to be dismissed, being devoid of merit.

# 12. It is also pointed out by the Respondent-Liquidator that the Appellants-Suspended Directors have not been cooperating with the Liquidator and not paid the penalty also and the CD has been recommended for dissolution. This matter was heard by NCLT by the order dated 09.11.2021 and also the Appeal before this Tribunal on 14.02.2022 and opportunity has been given to the Appellants, so the present appeal is hit by res-judicata. In case it was not hit by res-judicata, even then we won’t have been able to decide it on merits basis the grounds raised by the Appellant. The Appellants and claimed that these were post-dated cheques issued to one Mr Kewal Kishan for repayment of loan and which were issued before the initiation of CIRP of the CD, but the same were presented after the initiation of the CIRP. Therefore, the fault was not of the present Appellant. This argument does not cut much wise and is not tenable as the Appellant could have very well instructed Mr Keval Kishan not to present those cheques as moratorium had kicked in.

Appraisal:

# 13. We have heard the submissions of Ld. Counsel appearing for the Appellant as well as Ld. Counsel appearing for the Respondents and also perused the materials placed on record. Since the Impugned Order and facts of CA (AT) (Ins.) Nos. 432 and 433 of 2025 are the same, we have taken both the Appeals them together.

# 14. It is a matter of record that the CIRP of the Corporate Debtor was initiated by an order dated 05.12.2018, passed by the Adjudicating Authority. Consequently, Mr. Anoop Kumar Goyal was appointed as the Interim Resolution Professional and was subsequently confirmed as the Resolution Professional of the Corporate Debtor.

# 15. The Liquidation process was initiated by an order dated 04.01.2021, issued in IA-5415-2020 by this Adjudicating Authority, appointing Mr. Sanjay Garg as the Liquidator of the Corporate Debtor.

# 16. In IA No 1253 of 2020, the resolution professional had sought directions under Section 19(2) for the suspended board of directors for providing the record and other information of the Corporate Debtor. After hearing in detail, the adjudicating authority, on 9/11/2020 ordered that both directors of the CD namely Ashish Chaturvedi and Sanjay Kapoor have grossly violated the provisions of Section 128(5) of the Companies Act 2013, for which the punishment is provided under Section 128(6) of Companies Act 2013. Invoking the provisions under Section 128(6) of the Company Act 2013, the adjudicating authority imposed a penalty of Rs 5,00,000 on each namely Mr Ashish Chaturvedi and Mr Sanjay Kapoor.

# 17. Further in an Application No I.A.2025/2020 of the Resolution Professional under Section 60(5) read with Section 66 of the Code Adjudicating Authority on 09th November 2021 noted that several opportunities were given to the Respondent to file reply as to whether the money i.e. Rs 32 lakhs have been withdrawn from the account of the Corporate Debtor. However, no reply was placed on record by the Appellants herein. Accordingly, the AA directed the suspended Directors of the Corporate Debtor (Respondents herein) to deposit a sum of Rs 32 lakh along with interest @12% per annum from the date of withdrawal. For better appreciation the relevant portion of the order of Adjudicating Authority is extracted below:

• “IA 2025/2020

• Counsel for the Resolution Professional is present. Counsel for the Respondents is present. As seen from the previous order dated le. 13.09.2020, 19.10.2020 and 02.11.2020, the opportunities were given to the respondent to file reply and affidavit to the effect as to whether the money Le. Rs. 32 lakhs has been withdrawn from the account of the Corporate Debtor viz., M/s. A to Z Barter Private Limited, maintained at HDFC Bank, Branch Mayapuri. However, no reply has been filed nor any affidavit is placed on record by the Respondents.

• It is submitted by the counsel for the Resolution Professional that CIR Process was initiated on 10.12.2019 and the IRP has taken the charge of CD and during the moratorium declared under Section 14 of the IBC, on 20.12.2019, an amount of Rs. 16.50 lakhs and Rs. 10 lakhs was withdrawn by the Respondents through the Authorized signatories of the CD and again on 13.02.2019, an amount of Rs. 5.50 lakhs was withdrawn which is in violation of the provisions of section 14 of the CIRP and in spite of the present application for depositing the amount withdrawn to the accounts of the CD, the respondents have not bothered to deposit an amount of Rs. 32 lakhs approximately.

• In view of the facts and circumstances stated in the Application and the arguments advanced on behalf of the Resolution Professional and the Respondents, we hereby direct the respondents to deposit an amount of Rs.32 lakhs along with interest 12% per annum from the date of the withdrawal and deposit the total amount to the accounts of the Corporate Debtor being maintained by the Resolution Professional within a period of 21 days from the date of this order and an affidavit of compliance shall be filed by the Respondent(s) in the Registry. In terms of the above, the IA stands disposed of.”  [emphasis supplied]

# 18. The suspended board of Directors preferred an appeal [CA(AT) (Insolvency) No. 47/2021] before this Appellate Authority. This Appellate Tribunal on 29.01.2021 heard the matter and noted that as per the order rated 9th November 2020, the Appellant i.e. the erstwhile director of the corporate debtor was directed to deposit the total amount of Rs 32,00,000 along with interest at the rate of 12% p.a. from the date of withdrawal, which was in violation of the provisions of Section 14 of the of the Code. It was noted that no cogent legal grounds assailing the impugned order and justifying the retention of the amount withdrawn in utter violation of the order passed under Section 14 of the Code during the CIRP has been assigned. Faced with this situation the learned Counsel for the Appellant had offered to withdraw the appeal and accordingly the appeal was dismissed as withdrawn vide order dated 29th January 2021 by this Appellate Tribunal.

# 19. In the meantime, on 14 February 2022, in the Company Appeal (AT) (Insolvency) No. 1103 of 2020, under Section 61 of the Code, assailing the order dated 09.11.2020, this Appellate Tribunal in its orders agreed with the findings of the Adjudicating Authority with respect to deposit of Rs 32,00,000 with the Corporate Debtor. But with respect to the imposition of penalty on the suspended directors, the matter was remanded back to decide the matter afresh after giving the opportunity of hearing to the appellants. The Judgment (supra) had recorded the following observations:

• “9. Paragraph 6 of this judgment provide ample indication about the non- cooperation of the Appellants in providing requisite documents and records pertaining to the functioning of the corporate debtor which were requested by the erstwhile resolution professional, and later by the liquidator. Therefore, the resolution professional could not carry out his duties as required under the IBC for insolvency resolution of the corporate debtor and when the corporate debtor was sent into liquidation, the liquidator was unable to carry out the liquidation process in accordance with the provisions of Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Moreover, when the Adjudicating Authority provided multiple opportunities to the Appellants to clarify their position by filing their replies in IA 1253/2020 the Appellants were totally remiss in doing so.”

• “11. In compliance of this order, the liquidator sent communication to the erstwhile Directors to deposit the said amount of Rs. 32 lakhs along with interest, which was also not complied with. Thus, the Appellants have not only not provided the records and financial documents relating to the corporate debtor to the erstwhile resolution professional and the liquidator despite being requested to do so many times, but they have also not complied with the Adjudicating Authority’s orders given on 09.11.2020. Such acts of total carelessness in complying with the requirements of law, amounting to defiance and disrespect of the legal process, cannot be condoned and needs to be dealt with strictly in accordance with the provisions of Chapter VII titled “OFFENCES AND PENALTIES” of the IBC.”            [emphasis supplied]

# 20. We find that while deciding Company Appeal (AT) (Insolvency) No. 1103 of 2020, this Appellate Authority, through its judgment dated 14.02.2022, had adverted to all the contentions of both the parties and recorded specific findings therein. The contents of these Appeals have already been adjudicated upon by this Appellate Authority. We had remanded CA 1253/2020 to the AA for fresh hearing with respect to the penalty of Rs 5,00,000 to be imposed as per the provisions and of the code- the relevant extract are as follows:

• “12. With regard to the argument of the Learned Counsel of the Appellants that the Adjudicating Authority has imposed the penalty on the two ex-directors by invoking provisions of the Companies Act, 2013, and thus passed the Impugned Order by travelling beyond their jurisdiction, we are of the view that since the IA No. 1253/2020 was filed under the provisions of IBC, it would have served the requirement of law if any order regarding the penalty was imposed under the provisions of IBC. Moreover, it would have served the cause of natural justice if the Appellants were given an opportunity to be heard before imposition of any penalty. Chapter VII of the IBC which lays down “Offences and Penalties” under which officers of the Corporate Debtor can be penalized and/or punished with imprisonment is relevant in this regard.

• 13. In the light of the above, we direct that the case be remanded to the Adjudicating Authority for taking a decision under the provisions of IBC after giving an opportunity to the Appellants to present their case and giving due consideration of the facts of the case in IA 1253/2020. With these directions, we set aside the Impugned Order whereby penalty of Rs. 5 lakhs each on the Appellants has been imposed and remand the matter to the Adjudicating Authority for passing necessary orders under the provisions of IBC.”            [emphasis supplied]

# 21. The said CA 1253/2020 was heard accordingly by the AA, and was decided by the Impugned Order dated 16.01.2025. The Appellant has Once again through this Appeal in Company Appeal (AT) (Insolvency) No. 432 and 433 of 2025 challenged the recovery of Rs 32,00,000 with interest. This was not appreciated by this Appellate tribunal in its order dated 14th February 2022. The orders dated 09.11.2021, with respect to deposit of Rs 32 lakhs. Buy agitating it again and again the Appellant is wasting the time of the Adjudicating Authority as well as the Appellate Authority. The Appellant is hit very hard by res judicata with respect to raising the appeal to deposit of ₹32,00,000. The matter has been well settled by the Adjudicating Authority and we do not find any infirmity in the order.

# 22. We note that CA 1253/2020 was preferred during the CIRP stage. Through the filing of IA 2021/2022 by the liquidator the fact of continuing non-cooperation of the Appellants as well as the brazen disobedience of the Appellants vis-à-vis Orders passed by the AA and this Appellate Authority qua wrongful utilisation of Rs 32 lakhs during the CIRP moratorium are once again reinforced. The IA 2021/2022 was heard and was decided by the Impugned Order dated 16.01.2025. We find that the Appellants had shown continued non-cooperation during the CIRP and during the liquidation process, and the same is continuing as on date.

# 23. In summary we find that the Appellants have defied the:

• Orders dated 09.11.2021 of the AA in IA No. 2025/2020 which contained directions to deposit a sum of Rs 32 lakhs along with interest @12% p.a.

• Order dated 29.01.2021 of this Appellate Authority in Company Appeal (AT) (Ins) No. 47/2021 which was dismissed as withdrawn. We note that with the withdrawal of this Appeal, the Order of the AA dated 09.11.2021 of the AA in IA No. 2025/2020 had attained finality.

• The Judgment dated 14.02.2022 of this Appellate Authority in CA (AT) (Ins) No. 1103/2020 wherein the operative part of orders relates only relate to costs/penalty to be heard afresh by AA.

And still the said amount, along with interest, has not been paid by the Appellants hitherto -which order had attained finality and is hit by res-judicata and is being agitated again and again.

# 24. In the above facts and circumstances, we note that the order dated 9th November 2021 has not been challenged before the Appellate Authority and has thus attained finality. Thus we do not find any infirmity in the orders of the Adjudicating Authority in allowing IA No 2021 of 2022 which prays to direct the suspended Directors to deposit to the account of the Corporate Debtor an amount of Rs 32 lakhs along with interest at the rate of 12% per annum from the date of withdrawal, in compliance of orders dated 9th November 2020 of the AA in IA number 2025 of 2020 and 29th January 2021 of this appellate tribunal in CA (AT) (Ins.) No. 47 of 2021.

Orders

# 25. Accordingly, we dismiss the appeal of the suspended directors as it is devoid of any merits. Further we find this to be frivolous and vexatious litigation and has wasted lot of time of the Court in avoidable litigation. We note that the Appellants-Suspended Directors in both the Appeals have shown abject non-cooperation during the CIRP and thereafter liquidation process. We note that even now, none of the documents as required by the Liquidator/Respondent have been provided by the Appellants hitherto and also not deposited back Rs 32 lakhs with interest as ordered by the AA. Therefore, we are inclined to impose cost of Rs 5 lakh on each of the Directors and order accordingly to be deposited in PM’s Relief Fund, apart from the amount to be deposited as per the orders of the Adjudicating Authority.

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Ssarvi Resolution Services LLP Vs. Mr. Kamalkumar Agarwal & Ors. - However, this part of the claim made by the Respondents remains unsubstantiated as no evidence has been brought on record of this Tribunal to prove or indicate that the cheques were drawn prior to the insolvency commencement date.

 NCLT Mumbai-II (2024.12.19) in Ssarvi Resolution Services LLP Vs. Mr. Kamalkumar Agarwal & Ors. [I.A. NO. 3653 OF 2024 IN CP(IB) NO. 368(MB)/2023] held that;.

• Further, the Respondent No.02 has pleaded in his reply that the payments towards the salaries of the employees and the trade payables of the Corporate Debtor were made by cheques drawn prior to the insolvency commencement date. 

• However, this part of the claim made by the Respondents remains unsubstantiated as no evidence has been brought on record of this Tribunal to prove or indicate that the cheques were drawn prior to the insolvency commencement date. 

• Thus, Respondent No.02 has miserably failed to establish his defence and, therefore, an adverse inference is to be drawn against them for not producing the evidence available.

Excerpts of the Order

# 1. The instant Interlocutory Application is filed by the Applicant/Resolution Professional of the Corporate Debtor under Sections 66, 74 and 60(5) of the Insolvency and Bankruptcy Code, 2016 (‘IB Code’) read with Rule 11 of the N.C.L.T. Rules, 2016 seeking reimbursement of the amount withdrawn from the bank account of the Corporate Debtor during the subsistence of the moratorium. The Applicant has prayed, inter-alia, for the following reliefs:

• I. Pass a direction to the Secretary/Joint Secretary of Ministry of Corporate Affairs or such other person to investigate the affairs more specifically the appropriation of INR 8,05,11,748/- amount by the Respondents in violation of moratorium u/s 14 of the Code;

• Ii. Pass an order reversing the appropriation of the amount of INR 8,05,11,748/- by the Respondents and further direct the Respondents to contribute the above sum to the Corporate Debtor’s bank account;

• Iii. Pass an order directing the Respondents to provide details regarding the disbursal of the amount of INR 8,05,11,748/- that was withdrawn from the bank account.

# 2. The facts of the case as pleaded by the Applicant in its application are briefly stated as under:

I. The Applicant is the Resolution Professional (‘RP’) of Supreme Transport Organization Private Limited i.e. the Corporate Debtor, who was appointed by the Order of this Tribunal dated 24.01.2024. Respondent Nos. 1, 2, and 3 are Shareholders/Directors of the Corporate Debtor and have been in charge of the affairs of the Corporate Debtor.

Ii. The Adjudicating Authority, vide Order dated 08th September, 2023, admitted the captioned Petition filed by Axis Bank Limited which led to the commencement of the corporate insolvency resolution process of the Corporate Debtor.

Iii. Around 15th September, 2023 the Respondent No.02 filed a Company Appeal (AT)(Insolvency) No. 1216 of 2023 before the Hon’ble NCLAT impugning the Admission Order. While the Hon’ble NCLAT directed that the Committee of Creditors (‘CoC’) of the Corporate Debtor shall not be constituted, it also directed the Respondent No.02 (i.e. the Appellant therein) to deposit an amount of Rs. 10.49 crores in a Fixed Deposit in the name of Registrar, NCLAT.

Iv. As the Respondent No.02 needed funds to deposit the aforementioned amount, the Respondent No.02 moved an application bearing IA No. 4871 of 2023 during the pendency of the aforesaid appeal before the NCLAT seeking permission to dispose of the two properties of the Corporate Debtor so that out of the proceeds obtained from the sale of the two properties, the Respondent No. 02 can deposit the aforementioned amount with the Registrar, NCLAT. The Appellate Tribunal vide its Order dated 16th October, 2023 rejected the above-referred application on the ground that the prayers to sell unencumbered properties cannot be accepted as the CIRP had commenced. However, the Hon’ble NCLAT gave thirty days further time to make the deposit, failing which the interim order shall stand vacated.

v. While on one hand, the Respondents did not hand over the custody of the Corporate Debtor’s office and assets and also failed to provide the relevant information and details of the Corporate Debtor, as needed by the IRP u/s 19 of the Code, on the other hand, the Respondents continued to illegally operate the business, using monies from the bank accounts of the Corporate Debtor and also proceeded to sell the assets of the Corporate Debtor in teeth of the moratorium imposed under Section 14 of the Code.

vi. It appears that the Respondents illegally and without any authority, sold one asset of the Corporate Debtor to Respondent No. 04, during the moratorium, for which an amount was received in the bank account of the Corporate Debtor maintained with Bank of Baroda. Thereafter, the Respondents made a fixed deposit of INR 7,59,26,262/- in the name of Registrar, NCLAT and by way of a new application sought additional time to deposit the remaining sum of INR 2.90 crores by December 03, 2023. Thus, it is apparent that Debtor and its illegal use by Respondent Nos. 01 to 03, immediately informed the Bank of Baroda about the passing of the Admission Order. Bank of Baroda informed by way of a letter that they have frozen two accounts of the Corporate Debtor which were being illegally used by Respondent Nos. 01 to 03 and also provided the Applicant with a copy of Bank Statement which clearly shows illegal use of monies of the Corporate Hon’ble NCLAT has been made from the monies received by Respondent 8th September, 2023 and that the monies have been also received on behalf Respondent No. 02 made a fixed deposit in favour of the Registrar, NCLAT from a bank account of the Corporate Debtor with Bank of Baroda, which is in complete violation of the moratorium-imposed u/s 14 of the Code.

vii. The Applicant, upon becoming aware of the bank account of the Corporate Debtor and its illegal use by Respondent Nos. 01 to 03, immediately informed the Bank of Baroda about the passing of the Admission Order. Bank of Baroda informed by way of a letter that they have frozen two accounts of the Corporate Debtor which were being illegally used by Respondent Nos. 01 to 03 and also provided the Applicant with a copy of Bank Statement which clearly shows illegal use of monies of the Corporate Debtor

viii. Pursuant to the hearing held on 01st December 2023, the Applicant was informed that the fixed deposit submitted by Respondent No.02 before the No.02 from the sale of assets of the Corporate Debtor. The Applicant received an email from Respondent No.04 being the alleged purchaser of the properties of the Corporate Debtor. In the said email, certain documents have been shared, out of which three documents are sale deeds dated November 02, 2023 whereby certain land of the Corporate Debtor situated at Village: Khanvale, Taluka: Panvel, has been sold to Respondent No.04 by the Appellant/Respondent No.02 illegally acting in its capacity as the director of the Corporate Debtor. It is apparent that the said sale deed was of the Corporate Debtor. It is also not out of place to state that the land of the Corporate Debtor, which has been illegally sold, stood already been executed and registered after the insolvency commencement date i.e. The Applicant, upon becoming aware of the bank account of the Corporate mortgaged to Axis Bank Ltd and the Axis Bank has not been intimated of the sale.

ix. The exact details of the properties of the Corporate Debtor situated at Village: Khanvel, Taluka: Panvel, District: Raigad, which were illegally sold to Respondent No.04 by Respondent No.02, are as under:

Sr. No.	Description of the Property being Non-Agricultural Open Land	Admeasuring Square Meters	Sale Amount (in INR)
1.	Gat No. 101, Hissa No. 2/A	2220	5,81,00,000/-
2.	Gat No.103, Hissa No. 2	430	1,13,00,000/-
3.	Gat No.103, Hissa No. 1/2/ A	2810	7,06,00,000/-
	TOTAL		14,00,00,000/-

x. Thus, it is seen that a sum of Rs. 14 crores collectively was deposited in the Bank of Baroda account of the Corporate Debtor, which was used to make a deposit in the Hon’ble NCLAT. The conduct of the Respondents is entirely unlawful, as they have engaged in sale of an encumbered property and utilized the sale proceeds to make deposits before the Hon’ble NCLAT.

Xi. The details of monies which were illegally withdrawn by the Respondents from the bank account of the Corporate Debtor after the insolvency commencement date have been given in Para 5.21 of the application. A sum of INR 8,05,11,748/- was illegally withdrawn by the Respondents from the bank account of the Corporate Debtor after the insolvency commencement date, which now needs to be brought back to the account of the Corporate Debtor and, therefore, it is necessary to give appropriate directions to the Respondents to contribute the aforesaid sum. Hence this application.

# 3. Reply of the Respondent

The Respondent No.02 has filed his Affidavit-in-Reply dated 08th October, 2024. The reply of the Respondent is summarized as under:

I. One of the principal contentions of the Applicant is that a property situated in Panvel was sold during the corporate insolvency resolution process and thus, provisions of Section 74 of the Code are attracted. In this regard, it is submitted that Section 74, being a penal provision, requires presence of mens rea/intention to defraud/criminal intent as a necessary ingredient for a person to be convicted. However, in the facts of the present case, it is clear that the proceeds from sale of the assets of the Corporate Debtor were not misappropriated but the same were deposited in favour of Registrar, NCLAT by way of a demand draft, thus, negating any malafide intent attributable to the Respondents.

ii. The buyer of the property i.e. Golden Gate Developers (being Respondent No.04 herein) was aware of the CIRP and based on the assurances of the said buyer, the Respondent No.02 entered into the sale deed. However, the execution of sale deed does not establish any malafide or criminal intent of the Respondent No.02 inasmuch as the money received from sale was deposited with NCLAT and thus, there was no intention to defraud any creditor or stakeholder in the process.

FINDINGS

# 4. We have heard the learned Counsels for the Applicant and the Respondent and we have carefully gone through the pleadings and the documents and materials placed on record.

# 5. The case of the Applicant is premised on bank transactions which show that monies were received in respect of the assets which were illegally sold by the Respondent No.02 and the payments too were illegally made by the Respondents from the Bank of Baroda account of the Corporate Debtor during CIRP in teeth of the statutory moratorium-imposed u/s 14 of the Code. With reference to the transactions mentioned in Para 5.21 of the application, the Respondent has pleaded that a fixed deposit of around Rs. 7.59 crore was deposited with Hon’ble NCLAT and the remaining transactions were towards payment of salaries to the employees of the Corporate Debtor and other trade payables to some other entities. The Respondent No.02 has taken a defence that though the assets were sold during the CIRP, there was no intention to defraud the creditors of the Corporate Debtor as the amounts were paid towards deposits with NCLAT, salaries of the employees and trade payables of the Corporate Debtor in the regular course of business. Thus, it is not at all in dispute that the amounts aggregating to INR 8,05,11,748/- were withdrawn/paid by the Respondents from Bank of Baroda Account of the Corporate Debtor during the CIRP when the moratorium was in place.

# 6. It cannot be disputed that as per the provisions contained in Section 17 of the Code, when the Corporate Debtor is admitted into CIRP, the powers of the Board of Directors of the Corporate Debtor stand suspended and the management of the affairs of the Corporate Debtor vests in the IRP. Therefore, the defence taken by the Respondent that amounts were withdrawn from the bank account of the Corporate Debtor during the CIRP for depositing the same with the Hon’ble NCLAT and for making the payments to employees and other Operational Creditors of the Corporate Debtor in the regular course of the business so as to keep the Corporate Debtor as a going concern, cannot be accepted without a pinch of salt since the Respondents had absolutely no mandate or authority to conduct such transactions as their powers stood suspended and the management of the affairs of the Corporate Debtor vested in the Applicant. Even otherwise, the Respondents have brought nothing on record to show that the payments were actually made towards the salaries of the employees or some trade payables. Mere email correspondences between the Applicant and Respondent No.02, copies of which have been annexed as Annexure-1 to the reply, cannot be said to be sufficient to establish the bona fide of the Respondents.

# 7. On perusal of records, we further find that the Respondent No.02 was aggrieved by the Admission Order dated 08th September, 2023 u/s 7 of the Code passed in the captioned Petition filed by the Axis Bank against the Corporate Debtor and, therefore, the said Respondent preferred an appeal before the Hon’ble National Company Law Appellate Tribunal (‘NCLAT’ or ‘the Appellate Tribunal’) vide Company Appeal (AT)(Insolvency) No. 1216 of 2023. The Hon’ble NCLAT, vide its Order dated 15.09.2023, directed the Respondent No. 2 (Appellant in the said appeal) to deposit INR 10,49,26,262/- with the Registrar, NCLAT within 30 days and until then, the Hon’ble NCLAT was pleased to direct that the CoC should not be constituted. While the said appeal was pending, in order to arrange funds for depositing the aforementioned amount, Respondent No.02 moved an Interlocutory Application No. 4871 of 2023 before the Hon’ble NCLAT seeking permission to sell two unencumbered assets of the Corporate Debtor. However, the Hon’ble NCLAT in its Order dated 16.10.2023 in the above-referred IA declined such permission and , inter- alia, held as follows:

• “2. By Order dated 15.09.2023, we allowed 30 days’ time to the Appellant to deposit the amount Rs. 10,49,26,262/- now the Appellant has come up in this Application seeking permission to sell unencumbered assets of the Corporate Debtor. CIRP having commenced, no permission to sell any assets of the Corporate Debtor can be granted in this Appeal.

• 3. We thus are of the view that prayers made in the Application can not be accepted. The Application is rejected.

• 5. We however in the ends of justice allow 30 days further time to make the deposit. We make it clear that if deposit is not made, the interim order shall stand vacated.”

• (Emphasis Supplied)

# 8. It is further note-worthy that despite the unequivocal order of the Hon’ble NCLAT passed on 16.10.2023, the assets of the Corporate Debtor were sold to Respondent No.04 vide Sale Deeds dated 02nd November, 2023. The aforementioned sales transactions have been impugned by the Applicant/RP in IA No. 2950/2024, which will be separately dealt with in the said IA and, therefore, it would not be appropriate for us to comment any further except that the said sale transaction was also in the teeth of mortarium and the Hon’ble NCLAT had declined to permit the Respondent to sell any property belonging to the Corporate Debtor.

# 9. Though the Applicant has levelled the allegations of fraudulent transactions against the Respondents u/s 66 of the Code, however, in the present application, this Tribunal is seized of the controversy of the withdrawal or payment of money from the bank account of the Corporate Debtor during the moratorium and the said fact has been satisfactorily established from the records and, in our considered view, the Respondents No. 01 to 03 can definitely be called upon to contribute the said sums which were illegally withdrawn or paid from the bank account of the Corporate Debtor. At this juncture, in our considered view, it is not necessary to go into the question as to whether or not the transaction in question falls within the definition of fraudulent transaction under Section 66 (1) or 66 (2) of the Code. Therefore, we confine ourselves to the violation of moratorium by the Respondents and call for contributions by them u/s 14 read with 60(5) of the Code.

# 10. Further, the Respondent No.02 has pleaded in his reply that the payments towards the salaries of the employees and the trade payables of the Corporate Debtor were made by cheques drawn prior to the insolvency commencement date. However, this part of the claim made by the Respondents remains unsubstantiated as no evidence has been brought on record of this Tribunal to prove or indicate that the cheques were drawn prior to the insolvency commencement date. Thus, Respondent No.02 has miserably failed to establish his defence and, therefore, an adverse inference is to be drawn against them for not producing the evidence available.

# 11. As a result of the foregoing discussion, it is held that the monies which were withdrawn or paid from the bank account of the Corporate Debtor by the Respondents during the CIRP, was undoubtedly in gross violation of the moratorium. Even otherwise, such an act on the part of the Respondents amounts to an offence under Section 74 of the IB Code, 2016 as the act of withdrawing money from the accounts of the Corporate Debtor was committed by the Respondents with impunity and it was in gross defiance of the orders of the Hon’ble NCLAT which had disallowed the request of the Respondents to sell any property of the Corporate Debtor to arrange for the money to be deposited with the Hon’ble NCLAT for the purposes of settlement with the Financial Creditor/Axis Bank Limited. Therefore, it is necessary not only to direct the Respondents No. 01 to 03, who were the directors in charge of the affairs of the Corporate Debtor at that time, to jointly and severally contribute the said amounts which were illegally withdrawn or paid from the bank account of the Corporate Debtor during the currency of the moratorium but keeping in view the audacity and temerity of the Respondents, we find it to be a fit case to refer the whole matter to the Insolvency and Bankruptcy Board of India (IBBI) and the Ministry of Corporate Affairs (MCA) to initiate necessary investigation and prosecute the Respondents under Section 74 of the IB Code, 2016.

# 12. Accordingly, IA No. 3653/2024 is hereby allowed in the following terms:

• I. Respondent Nos.01 to 03 are jointly and severally liable to contribute a sum of INR 8,05,11,748/- to the account of the Corporate Debtor within 30 days from the date of this order, failing which they shall be liable to pay the aforesaid sum with interest of 12% p.a. till the amount is actually deposited.

• Ii. A copy of this order be sent to the Insolvency and Bankruptcy Board of India (IBBI) and Ministry of Corporate Affairs (MCA) for taking appropriate steps to prosecute the Respondents under Section 74 of the IB Code, 2016.There shall be, no order as to cost.

• iii. Accordingly, I.A. No. 3653 of 2024 stands disposed of in above terms.

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