Rajeswara Rao Vittanala, Member - (1.) This Company petition bearing CP bearing CP (IB) No. 96/7/HDB/2017 is filed by M/s. Asset Advisory Services India Pvt. Ltd. Financial Creditor, U/s. 7 of IBC, 2016 R/w Rule 4 of the Insolvency and Bankruptcy(Application to Adjudicating Authority) Rules, 2016, by seeking to initiate Corporate Insolvency Resolution Process under IBC against VSS Projects Pvt. Ltd.
(2.) Brief facts, leading to the filing of present company petition, are as follows: 1) M/S. Asset Advisory Services India Pvt. Ltd., (CIN U93000A02008PTC059525) herein after called as Petitioner/Financial Creditor, is a private limited Company incorporated under the provisions of the Companies Act, 1956 and it is a "Financial Creditor" within the meaning of Sec. 7 of the Code, which reads as "Financial Creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to". 2) The Financial Creditor is engaged in the business of acting as financial advisors and consultants on all matters relating to assets, finance, investments, insurance, money markets, capital markets, fund arrangements etc., per its main object in the Memorandum of Association and Articles of Association. 3) M/S. V.S.S. Projects Pvt. Ltd., (herein after referred to as Respondent/Corporate Debtor) is a private limited Company incorporated under the provisions of the Companies Act, 1956, and it is a Corporate Debtor as defined in sub-section (8) of Section 3 of the code which reads as "Corporate Debtor" means a corporate person who owes a debt to any person". The Corporate Debtor is a having its registered office at Plot No. 74, Street No. 6, Umanagar, Begumpet, Hyderabad TG 500016 IN and is a "corporate person" within the meaning of Sub-Section (7) of Section 3 of the code. 4) The Financial Creditor had made available to the Corporate Debtor a Short Term Loan of Rs. 2,50,00,000/- (Rupees Two Crore Fifty Lakhs Only) for the repayment of OTS (One Time Settlement) amount outstanding with M/s. DHFL (Dewan Housing Finance Limited) from whom the Corporate Debtor had availed project finance. The Financial Creditor had disbursed the amount as follows: 5) The Corporate Debtor executed a Promissory Note and issued a duly signed receipt acknowledging the receipt of the amount of Rs. 2,50,00,000/- and promising to repay the same on or before 30.06.2016 together with interest @ 24% P.A. payable in advance monthly installments. To secure the repayment of the Loan amount together with the Interest thereon, the Corporate Debtor had submitted documents pertaining to 20 Unsold Units and other properties. 6) The Corporate Debtor had sent an email on 8/7/2016 confirming receipt of Rs. 2,50,00,000/- (Rupees Two Crore Fifty Lakhs Only) and the deposit of Original Title Deeds and promised to repay the loan amount with Rs. 2/- simple interest and had requested to adjust the amount of Rs. 20,00,000/- (Rupees Twenty Lakhs Only) remitted on 28/6/2016 towards interest and had reassured that the loan shall be closed by the end of July, 2016. However, it failed to honor its commitment of repayment of the amounts even after 30/06/2016. 7) Further, the Corporate Debtor had issued cheques bearing Nos. 786493, 786494, 786495, 786496 dated. 14.11.2016 all drawn on Andhra bank, Mushirabad Branch, Hyderabad, in discharge of part of the debt. However, the same were dishonored when presented as per the instructions of the Corporate Debtor for the reasons "stop payment". The Financial Creditor, after following the due procedure as contemplated U/s. 138 of the N.I. Act, has filed a complaint on the file of the Hon'ble XII Addl. Chief Metropolitan Magistrate, Nampally Hyderabad and the same is pending. 8) The Petitioner stated that the Corporate Debtor had alienated 3 Flats bearing Nos. 201, 203 and 712 illegally even though there is a charge in favor the Financial Creditor by virtue of an Equitable Mortgage by deposit of title deeds of the property. The Financial Creditor had initiated criminal proceedings for cheating and other offences against the Corporate Debtor for entering into such sale deed in utter violation of the understanding with the CCS, Hyderabad and the same was registered as Crime No. 259/2016. 9) In the above circumstances, in order to restrain the Corporate Debtor from illegally alienating the properties secured under the above arrangement, the Financial Creditor had approached the Hon'ble XIII Addl District and Sessions Judge, R.R. District, Hyderabad by filing CO.S. No. 1 of 2017, and also obtained status quo order in respect of schedule A to X properties vide order dated 6th January, 2017 in IA No. 48 of 2017. 10) As on 30-04-2017, the amount in default works out to Rs. 2,95,00,000/- (Rupees Two Crore Ninety Five Lakhs Only Only). 11) It is stated that there is a "Financial Debt" in existence within the meaning of Sec. 8 (a) of the Code; M/s. Asset Advisory Services Pvt. Ltd., is a "Financial Creditor" within the meaning of Sec. 7 of the Code; M/s. V.S.S. Projects Pvt. Ltd., is a "Corporate Debtor" within in the meaning of Sec. 8;The "Corporate Debtor" had committed default as per Sec. 3, Sub-Section 12 of the Code for nonpayment of "financial debt".
(3.) The respondent/Corporate Debtor has filed a reply date 25th July, 2017. The following are their main contentions: 1) The petition is untenable and unsustainable, either in law or in facts. M/S. VSS PROJECTS (PVT.) LTD., is sought to be depicted as Corporate Debtor, by Financial Creditor, with ulterior motives to grab property of 20 Flats (Including three (3) Flats already sold) pertaining to Corporate Debtor. The present state of affairs is exclusively due to illegal conduct and functioning of Financial Creditor. As on date, Corporate Debtor is the absolute owner of 17 flats and 2 acres of land costing more than Rupees 10 crores. Each flat is costing around Rs. 40 lakhs as per latest market value Certificate. 2) By selling/adjusting 6 flats, entire amount paid by Financial Creditor under OTS facility to DHFL can be re-paid. Claim of Financial Creditor in COS No. 1 of 2017 is sought to be adjusted with 6 Flats, as pleaded in written statement-cum-counter claim filed in COS 1 of 2017 pending adjudication, before Hon'ble XIII Addl. Judge, R.R. District. 3) The Corporate Debtor is ready to execute six (6) sale deeds in favor of Financial Creditor OR alternatively sell 6 Flats out of 17 un-sold flats and re-pay the entire amount of Rs. 2.5 crores paid to DHFL. But, Financial Creditor obtained Status-Quo orders, by misrepresenting to Hon'ble Court and also by suppressing material facts and documents. The said Status Quo orders are sought to be vacated and case stands posted to 28-7-2017. 4) Corporate Debtor is neither Bankrupt nor can be depicted or declared as an Insolvent, since Corporate Debtor and its MD are owning properties worth more than Rupees 10 crores and amount payable to Financial Creditor is only Rupees 2.5 crores. 5) Corporate Debtor filed Counter - claim for an amount of Rs. 1.02 Crores by paying court fee, against Financial Creditor, on account of loss sustained by it due to illegal conduct and functioning of Financial Creditor. Such functioning resulted in causing immense financial loss and also credibility of Corporate Debtor. Corporate Debtor reserved its right in COS No. 1 of 2017, to make further claims against Financial Creditor, owing to loss of its credibility due to paper publication, thus damaging prestige and reputation of Corporate Debtor. Further claim would be made subsequent to adjudication of criminal proceedings. 6) It is stated that Financial Creditor has volunteered to issue D.D. for an amount of Rs. 2.5 Crores, in favor of Deewan Housing and Finance Corporation Limited (D.H.F.L) towards OTS Payable by Corporate Debtor to DHFL; after receiving:- i) 5 undated cheques of Rs. 50 lakhs each, from Corporate Debtor on 31/03/2016. ii) Stamped receipt for Rs. 2.5 Crores from Corporate Debtor, on 30/03/2016. iii) Demand promissory note for an amount of Rs. 2.5 Crores, in favor of Financial Creditor on 31/03/2016, and with iv) An express condition and understanding between parties herein that the amount of Rs. 2.5 Crores shall be paid by Corporate Debtor to Financial Creditor, by selling some Flats out of 18 flats that were got released from mortgage with DHFL. 7) DHFL returned Original Documents of properties mortgaged with DHFL on 12/04/2016 and later, executed release deed on 27/04/2016 in favor of Corporate Debtor. After receiving original documents on 12/4/2016, same were handed over to Financial Creditor for verification on 12/4/216 itself. Whereas, Financial Creditor did not return original documents on the pretext of busy schedule and lack of time to verify and sent email dated 25/4/2016 enclosing MOU for 20 flats with a request to execute MOU and create charge on 20 flats. Corporate Debtor did not agree to sign MOU, since the same would deprive Corporate Debtor to pay back OTS amount to Financial Creditor, apart from depriving Corporate Debtor to accommodate those persons, who helped M/S. VSS PROJECTS (PVT) LTD., to complete its venture. 8) Later, on 09/05/2016, Financial Creditor handed over franked MOU and Agreement of Sale in respect of 20 flats to Corporate Debtor for execution in its favor. Corporate Debtor refused to sign, since the same was contrary to initial agreement and understanding, at the inception of Contract on 30-3-2016. Corporate Debtor can never pay OTS amount to Financial Creditor if MOU and AOS are executed, without selling some of the 17 Flats; apart from inviting litigation from three flat owners, to whom the flats were sold in 2016. 9) Later, Financial Creditor sent emails on 07/07/2016 with request to execute documents mentioned therein by projecting false version. 10) It is stated that Financial Creditor has suppressed and concealed above facts and emails exchanged between parties till 08/07/2016, particularly, those relating to MOU, Agreement of Sale confirms the ulterior motives of Financial Creditor to grab all 20 Flats (though only 17 flats are unsold Flats) pertaining to Corporate Debtor. 11) It is stated that it is highly improbable for Corporate Debtor to arrange for an amount of Rs. 2Crores on 16/11/2016 within 1 week from date of demonetization on 8-11-2016 and issued four (4) cheques for Rs. 2 crores, when the Corporate Debtor could pay only 20 lakhs from April 2016 to November 2016 to Financial Creditor, by selling one flat, out of 18 Flats got released from DHFL, after OTS payment. 12) It is submitted that Tribunal may kindly take Judicial Notice/Judicial cognizance of the impact of Demonetization and subsequent Notification by RBI on the Real Estate Sector/Industry; thus resulting in downward trend of Real Estate Market. Corporate Debtor is also one of the worst victims of:- * Demonetization impact, on 08/11/2016 * RBI Notification that no transactions beyond 2 Lakhs, & * Finally, the illegal conduct/Functioning coupled with avarice of Financial Creditor's Director whose conduct and functioning alone resulted in the present sad state of affairs and speculative litigation resorted to by Financial Creditor, with ulterior Motives. 13) It is stated that Since there is a dispute between parties herein and there are claims and rival claims pending adjudication before the competent civil court, it is not open for Financial Creditor to project M/S. VSS PROJECTS (PVT) LTD., either as insolvent or bankrupt; more particularly, when the proposed Corporate Debtor is capable of paying OTS amount by selling some of the 17 flats and also ready to sell 6 flats in favor of Financial Creditor, as submitted above and also as pleaded in WS-cum-Counter Claim. 14) It is stated that the petitioner has initiated criminal case vide FIR No. 259/2016 in CCS by fabricating false evidence, i.e. letter dated 1/11/2016, against Corporate Debtor, 3 flat owners who purchased 3 flats and also SBH that extended loan facility, apart from initiating proceedings U/S. 138 NI Act and filing Commercial suit COS: 1/2017 before the commercial court; disentitled Financial Creditor for any relief from this Hon'ble Tribunal. 15) It is further alleged that the petitioner having not satisfied with the above, has filed the present petition with unclean hands by suppressing material facts and documents. The above events confirm that Financial Creditor wants to indulge in speculative litigation and somehow secure some order of appointment of insolvency professional to ensure distress sale of 17 unsold Flats, so that the flats would not fetch the prevailing market value and can grab the entire property of Corporate Debtor to realize his ultimate goal of swallowing all the properties of Corporate Debtor costing around 10 crores for a mere debt of 2.5 crores. 16) It is stated that the functioning of Financial Creditor is detrimental to survival of Rule of Law and may not be entertained by this Honorable Tribunal in the interest of Justice. 17) It is stated that the petition is hopelessly premature to construe the Corporate Debtor either as insolvent or bankrupt and also to initiate above proceedings under Insolvency and Bankruptcy Code, 2016. The alleged default to repay even after the expiry request date of 31-07-2016 was due to frustration of contract by Financial Creditor and also failure to honor reciprocal promise by Financial Creditor, as agreed on 31/03/2016; apart from changing stand/version to charge 50 % interest instead of agreed 24%; while insisting to execute alleged MOU and AOS (which are concealed and suppressed before this Hon'ble Tribunal). The alleged default when 4 cheques dated 14/11/2016 got bounced on 18/11/2016 is also the ingenious creation and invention of Financial Creditor to dwell in speculative litigation before various forums with ulterior motives and evil intentions to grab 20 flats, though only 17 unsold flats are available for sale. 18) It is stated that version of Financial Creditor to the effect that" There is a financial debt in existence within the meaning of section 8(a) of the code" is untenable since Financial Creditor did not comply with the requirement of demand notice as envisaged in section 8(1) as a consequence the Corporate Debtor could not respond as specified in section 8(2)(a) However, viewed from any angle, the approach of Financial Creditor before this Honorable Tribunal is premature apart from its failure to ensure compliance of section 8(1) of the code, since Financial Creditor is relying upon section 8(a) of the code. It is further contended that the Corporate Debtor has not committed any default as per section 3(12) of the code as is evident from the above submission. M/S. VSS Projects Pvt. Ltd. is not a Corporate Debtor within the meaning of section 8. Even today, Corporate Debtor is prepared to deposit an amount of 2.5 crores before Competent civil court, where the case COS: 1/2017 is pending, in the event of allowing Corporate Debtor to sell some of the 17 unsold flats; which could not be sold due to the Status Quo Order. The said I.A. is pending adjudication before the Hon'ble XIII Addl District Judge, R.R. District Court. The Corporate Debtor had also clearly pleaded about the mode of payment of principle loan and also the counter-claim against Financial Creditor by paying court fee and the same is pending adjudication in COS No. 1 of 2017 before XIII Addl Judge, R.R. District. 19) It is stated that the prayer of Financial Creditor is not only devoid of any merits whatsoever but it is also riddled with several illegal acts of commission and omission by Financial Creditor to grab the properties of Corporate Debtor by preventing him to sell the available 17 flats costing around 40 lakhs each and repay a meagre amount of Rs. 2.5 Crores. 20) He has relied upon the following decisions in support of his case: a) MANU /SC/0303/2012 : AIR 2012 SUPREME COURT 2513-Head Note-B: Suppression material fact - Petition against rejection of application for discharge-Fact that petition to quash charge sheet filed by petitioner was dismissed-Not disclosed-SLP liable to be dismissed on this ground. (Para-6). b) MANU /SC/0705/2013 : AIR 2013 SC 3568-Ground raised by concealing fact that appellant and respondent had exchanged communication about area to be handed over-Appellant having approached court by concealing facts explanation given has to be held unsatisfactory-Prayer for condonation liable to be rejected. c) 2016 (4) ALD - Page No. 291 Para-9)-Non Mention in Plaint about notices exchanged prior to suit-And unexplained conduct in making claim for larger extent in Plaint than that mentioned by Plaintiff in notice, in facts and circumstances of case, would disentitle Plaintiff to equitable relief of temporary injunction. d) AIR 1992 DELHI - Civil P.C. 0-39, Rules 1 & 2, S. 151 of CPC-Relief of Injunction-Suppression of material Facts-Effect---------Suit liable to be dismissed without going into merits. (Paras-9, 10, 11 & 12). e) MANU /SC/0192/1994 : AIR 1994 SC 853-CPV Sec. 2(2)-Evidence Act S-44-Proceeding in Court - Fraud by Litigant-Withholding vital document relevant to litigation-It is fraud on Court - Guilty party is liable to be thrown out at any stage (Para-8). f) MANU /DE/1450/2001 : AIR 2002 DELHI 151-CPC Order 39, Rules 1 & 2-Discretionary Relief of Injunction-Grant of-Any deliberate attempt on part of either party to suppress material fact would disentitle such party for granting such relief - Plaintiff withholding vital documents vital to litigation in order to gain advantage on other side - He would be guilty of playing fraud on court as well as on opposite party - Not entitled to discretionary relief of injunction. (Paras-12, 13, 14 & 15) 21) The Learned counsel, therefore, submit that ratio as decided in the above cases, are squarely applicable to the factual matrix of the instant case, wherein Corporate Debtor had deliberately withheld and suppressed material facts and documents, particularly e-mails. He, therefore, prayed that the petition is not only liable to be dismissed but it liable to be prosecuted for the offences of Cheating, Extortion, and Breach of trust and Fabrication of false evidence.;