M/S Realstep Agencies Private Limited vs M/s Progressive Finlease Limited

Hemant Kumar Sarangi, Member (T)

The present application is filed under Section 9 of Insolvency and Bankruptcy Code, 2016 (for brevity ‘IBC, 2016’), read with Rule 6 of the

Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (for brevity ‘the Rules’) by M/s. Realstep Agencies Private

Limited, (for brevity ‘Applicant’), through its authorized representative Mr. Sandip Kumar Modi, with a prayer to initiate the Corporate

Insolvency Resolution Process (CIRP) against M/s Progressive Finlease Ltd. (for brevity ‘Respondent’).

The Applicant, namely M/s Realstep Agencies Pvt. Ltd. is a Private Limited company, registered under the Companies Act, 1956, with CIN No.

U52100WB2015PTC205316, having its registered office at 18 B, Barbourne Road, 2nd Floor, Kolkata-700001.

The Respondent, namely M/s Progressive Finlease Limited, is a company incorporated on 11.01.1995 under the provisions of Companies Act, 1956

with CIN No. L6591DL1995PLC0643, having its registered office at S-2, Ground Floor, Plot No. A-2/3, Lusa Tower, Azadpur, New Delhi-110033.

The Authorised Share Capital of the respondent company is Rs.10,00,00,000/- and Paid Up Share Capital of the company is Rs.8,94,70,000/- as per

Master Data of the company.

It is the case of the applicant, that it is primarily engaged in the business of trading in securities, shares, debentures, derivatives and related

activities. On 2.01.2017 the directors/principal officers of the respondent approached the management of the Operational Creditor with a request to

purchase shares of a listed company namely, M/s Pincon Lifestyle EQ Limited. It is stated that substantial number of shares of the said company was

held by the Operational Creditor. Pursuant to such proposal, an MOU dated 02.01.2017 was signed by the Corporate Debtor and Operational creditor

and the operational creditor entered into negotiations to sell 2,25,000 shares of M/s Pincon Lifestyle EQ Limited to the corporate debtor.

The applicant further states that, it is pertinent to note that that the operational creditor and the corporate debtor entered into the said Memorandum

of Understanding to sel 2,25,000 shares of M/s Pincon Lifestyle EQ Limited @ Rs.317.30/-each at a total consideration of Rs. 7,13,92,500/- (Rupees

Seven Crore Thirteen Lakhs Ninety Two Thousand Five Hundred). It was further agreed, that the transaction would be given effect to by handing

over a Blank Delivery Instruction Slip (DIS), to the corporate debtor and only upon receipt of the entire consideration amount by the operational

creditor the blank DIS was to be executed for the transfer of shares to the account of the corporate debtor.

It has been stated by the applicant that during the course of the transaction the blank DIS was dishonestly executed by the corporate debtor without

the knowledge and the consent of the operational creditor and all the shares were transferred without making complete payment of the agreed/

admitted consideration amount. Such an act is in clear violation and breach of the Memorandum of Understanding entered into between the parties.

Thereafter by way of oral requests and letters, reminders were issued to the corporate debtor to pay the balance, after repeated persistence and

demand the corporate debtor admitted their liabilities to make payment and made some part payment to the tune of Rs. 3,21,00,000/- (Rupees Three

Crores Twenty One Lakhs), with assurance that the remaining amount shall be paid shortly.

In spite of various requests made and reminders sent by the Applicant, the respondent did not reply nor made the payment of balance amount, i.e.,

Rs.3,92,92,500/- (Rupees Three Crore Ninety Two Lakhs Ninety Two Thousand Five Hundred).

In pursuance of the default the corporate debtor issued a show cause notice dated 14.09.2017 to the corporate debtor, the copy of the notice has

been annexed by the operational creditor along with its application.

On failure to pay the outstanding dues by the Respondent, the applicant sent a demand notice dated 09.04.2018 under Section 8 of the Insolvency

and Bankruptcy Code, 2016 to the respondent asking them to make the entire payment of Rs.3,92,92,500/- (Rupees Three Crore Ninety Two Lakhs

Ninety Two Thousand Five Hundred), along with interest, amounting to Rs. 54,06,217/- (Rupees Fifty Four Lakhs Six Thousand Two Hundred and

Seventeen) @ 18% charged till 31.03.2018, within 10 days from receipt of the notice, failing which the applicant shall initiate the Corporate Insolvency

Resolution process against the Respondent.

The corporate debtor raised a dispute, by way of the notice of dispute under section 8(2)(a), dated 21.04.2018 of the I & B Code, 2016. Disputing

that the corporate debtor on 02.01.2017 purchased 2,25,000 equity shares of M/s Pincon Lifestyle which were valued at Rs. 317.30/- per share and

the corporate debtor was assured that the said shares will be transferred on the said date. That the operational creditor also served a bill of Rs.

7,13,92,500/- dated 02.01.2017, on the corporate debtor. The corporate debtor also states that, the operational creditor, under a serious conspiracy of

causing wrongful loss to the corporate debtor, did not transfer the shares in the corporate debtor’s account till the value of shares went down to

Rs. 106.90/- and on 10.03.2017 the said shares were transferred into the Demat Account of the corporate debtor, the total value of the shares when

purchased were Rs. 317.30/- and at the time of transfer of the value of the shares was only Rs. 106.90/- causing a loss of Rs. 210.04/- per share,

inter-alia, the corporate debtor states that, it has already filed a police complaint against the operational creditor and its director before the Police

Station Adarsh Nagar, which is still pending enquiry/investigation.

Records reveal that the said Police Complaint was filed on 20.03.2018, i.e., prior to the issuance of section 8 notice, which was issued on

09.04.2018. Charge sheet in the court of Ld. C.M.M Calcutta has also been placed on record.

Despite the demand notice sent under Section 8 of the Code, the Respondent failed to pay the amount demanded and has neither raised any notice

of dispute. As no payment was coming, hence this application, seeking to unfold the process of CIRP.

The applicant has stated that total debt due and payable is Rs.3,92,92,500/- (Rupees Three Crore Ninety Two Lakhs Ninety Two Thousand Five

Hundred), along with interest, amounting to Rs. 54,06,217/- (Rupees Fifty Four Lakhs Six Thousand Two Hundred and Seventeen) @ 18% charged till

31.03.2018

Hence, the application under section 9 of the IBC, 2016, was filed by the applicant to initiate CIRP. The applicant has also filed affidavit of service

wherein he states that the respondent has been served through dasti on 08.08.2018, the applicant also states that the respondent was also served

through email on 09.08.2018. The receiving of dasti service along with the screen shot of email has been annexed along with the application.

After the service of said notice, the respondents have caused appearance in the matter and have filed their reply, in its reply to the present section

9 application, the respondent states that there is no default on the part of respondent as has been alleged by the applicant. As per the respondent, one

Mr. Hari Tibrewala approached the director of the corporate debtor and induced the corporate debtor to purchase the shares of M/s Pincon Lifestyle

Limited and informed the corporate debtor that he is share market expert and as per his expertise the prices of the shares of M/s Pincon Lifestyle

Limited will increase and the corporate debtor shall make huge profits, the individual induced the corporate debtor to purchase certain shares from the

applicant and represented that the company, i.e., the applicant is owned by him through his employees who happen to be the directors of the applicant

company. The respondent further denies that no written agreement was executed between the applicant and the corporate debtor for this purpose.

It has further been stated by the respondent, that Mr. Hari Tibrewala informed the respondent that such shares will be sold to the respondent on a

price which shall be higher than the market price and he shall give instructions to his employees, i.e., the directors of the applicant company, to

transfer the shares on 02.01.2017 into DEMAT account of the respondent. The respondent was informed that the shares would be sold at Rs.

317.30/- per share and the applicant shall transfer 2,25,000 shares of M/s Pincon Lifestyle Limited on 02.01.2017 and on 02.01.2017 no shares were

transferred to the corporate debtor as was represented by the said individual namely Mr. Hari Tibrewala. On 10.03.2017 the applicant company

transferred 2,25,000 shares into the DEMAT account of the respondent when the price of the share of M/s Pincon Lifestyle Limited was of Rs.

106.90/- per share. The respondent being a law abiding citizen paid a total of Rs. 3,21,00,000/- which was Rs. 80,47,500/- in excess to the market

price of the share on 10.03.2018.

The respondent further states that, on perusal of the Share Transfer Account of the applicant, it was further learnt by the corporate debtor that the

applicant on 02.01.2017 never owned 2,25,000 shares of M/s Pincon Lifestyle Limited and its was on 09.03.2017 the applicant acquired 2,25,000

shares and the same were transferred into the account of the corporate debtor on 10.03.2017. The corporate debtor also states that the application

filed under section 9 of the I & B code, 2016 by the applicant has been signed and verified by Mr. Sandip Modi as authorized signatory of the

Applicant in Form 5 [Rule 6 sub-rule(1)], which requires the details of authorized signatory in Part II of Form 5. It is pertinent to mention here that the

Hon’ble NCLAT in case of Palogix Infrastructure Private Limited Vs. ICICI Bank Limited Company Appeal (AT) (Insol.) No. 30 of 2017 has

held that the said application filed through authorized signatory but without a Board Resolution passed by the Board of Directors with clear instructions

is liable to be rejected on such grounds. The Applicant has nowhere in its application has mentioned about the enclosing of such authorization,

therefore, the Application is liable to be rejected.

In its rejoinder the applicant states that, the contention of the respondent that one Mr. Hari Tibrewala, indirectly owns the Applicant Company is

not only wholly unsubstantiated but the Corporate Debtor has failed to place any proof/ material, documentary or otherwise, to show that Mr. Hari

Tibrewala is a director, Promoter, Investor and/ or shareholder in the applicant company. In absence of the same, the contention that Mr. Hari

Tibrewala is the indirect owner of the company has no legs to stand and is being used as a tool by the corporate debtor to escape the instant

proceedings. Moreover, the Memorandum and Articles of Association of the campany do not contain his name as promoter of the applicant company.

The contention of the respondent that the applicant and the corporate debtor never entered into any written agreement is misleading, the true and

correct factual position is that the applicant and the corporate debtor entered into a written agreement dated 02.01.2017 and the same was executed

between the parties. With regards to the issue of dispute being raised by the corporate debtor, the applicant states that, mere filing of the complaint

before the Police Station on false and frivolous grounds does not constitute to be a ‘dispute’ within the meaning of dispute in terms of section

8(2)(a) of the I &B code, 2016.

The applicant in its rejoinder, further states that the transaction was duly entered by valid execution of a delivery instructions slip which contained

the requisite signature and non-production of the recording of share transfer cannot override the clauses of the agreement which are binding on the

parties.

Further the Hon’ble Supreme of India in Mobilox Innovations Private Limited vs. KirusaSortware Private limited has observed that-

“The adjudicating authority, when examining an application under Section 9 of the Act will have to determine:

(i) Whether there is an “operational debtâ€​ as defined exceeding Rs.1 lakh? (See Section 4 of the Act)

(ii) Whether the documentary evidence furnished with the application shows that the aforesaid debt is due and payable and has not yet been

paid? and

(iii) Whether there is existence of a dispute between the parties or the record of the pendency of a suit or arbitration proceeding filed before

the receipt of the demand notice of the unpaid operational debt in relation to such dispute?

If any one of the aforesaid conditions is lacking, the application would have to be rejected.

Apart from the above, the adjudicating authority must follow the mandate of Section 9, as outlined above, and in particular the mandate of

Section 9(5) of the Act, and admit or reject the application, as the case may be, depending upon the factors mentioned in Section 9(5) of the

Act.â€​

As per the reply filed by the Corporate Debtor, it can be inferred & concluded that there is no establishment of ‘Operational debt’ against the

Corporate Debtor and the same is disputed by the Corporate Debtor and falls well within the definition of ‘Dispute’ as per Section 5(6)which is

reproduced below:

Dispute"" includes a suit or arbitration proceedings relating toâ€"(a) the existence of the amount of debt; (b) the quality of goods or service; or (c) the

breach of a representation or warranty.

It is further seen that the demand notice in the present case was issued under Section 8 (1) of the Code on 09.04.2018. Respondents have placed

on record the copy of FIR dated 20.03.2018, along with the charge sheet of the court of Ld. C.M.M Calcutta. It is thus seen that the dispute was

brought to the notice of the applicant prior to the issuance of the demand notice dated 09.04.2018 issued under Section 8 (1) of the Code.

It has been observed by this bench that the applicant has tried to mislead this bench by making two completely different statements in its

submissions given in its application under section 9 of the I & B Code, 2016 and in its rejoinder to the current application. The applicant in its

application has stated that;

“…. During the course of the transaction the blank DIS was dishonestly executed by the Corporate Debtor without the knowledge and

the consent of the operational creditor …â€​

Whereas, in its rejoinder the applicant states that;

“… it is submitted that the transaction was duly entered into by valid execution of a delivery instruction slip which contained the

requisite signatures and non-production of the recording of share transfer cannot override the clauses of the agreement which are binding

on the parties.â€​

It is made clear that any observations made in this order shall not be construed as an expression of opinion on the merit of the controversy and the

right of the applicant before any other forum shall not be prejudiced on account of dismissal of the instant application.

The applicant has attached the copy of Bank statements issued by HDFC Bank Ltd. in compliance with the requirement of Section 9(3)(c) of the

IBC 2016.

The registered office of respondent is situated in New Delhi and therefore this Tribunal has jurisdiction to entertain and try this application.

As a sequel to the above discussion, it is being observed that it is a case of pre-existing dispute and hence, this application is rejected and dismissed

and a cost of Rs.50,000/- is imposed on the Applicant under section 35 of the Code of Civil Procedure, 1908 for misleading the bench on facts as

elaborated in para 23 above. The amount will be paid to the Prime Ministers Relief Fund. The payment receipt of the same shall be submitted with the

Court Officer, Bench IV, within one week’s time.

Let the copy of the order be served to the parties