Dismissed

In the matter of Par Excellence Real Estate Private Limited Ib No. 616-ND-2020

NCLT17 May 2022

Case brief

AI extract

What is this about?

NCLT dismissed the application to initiate CIRP against Par Excellence Real Estate Private Limited. The court held that the transaction was a sham due to common directorship and fraudulent intent, ordering a penalty and a show cause notice.

What did the court decide?

Application dismissed; costs of Rs. 2 Lakh imposed; show cause notice issued under Section 65(1) of IBC, 2016.

In the matter of Par Excellence Real Estate Private… — Insolvency and Bankruptcy | NCLT (2022)

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THE NATIONAL COMPANY LAW TRIBUNAL NEW DELHI BENCH (COURT-II)

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IB No. 616/ND/2020

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IN THE MATTER OF:

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Zoom Communications Private Limited

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B-10, Greater Kailash Enclave Part – I, New Delhi – 110048.

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…PETITIONER/ OPERATIONAL CREDITOR

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VERSUS

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M/s Par Excellence Real Estate Private Limited

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DSC-319, DLF South Court Saket, New Delhi - 110017

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…RESPONDENT/ CORPORATE DEBTOR

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Order Delivered on: 17.05.2022

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Section: 9 of the Insolvency and Bankruptcy Code, 2016

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CORAM:

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SH. ABNI RANJAN KUMAR SINHA, HON’BLE MEMBER (JUDICIAL) SH. L. N. GUPTA, HON’BLE MEMBER (TECHNICAL)

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PRESENT:

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For the Applicant : Mr. Nikhil Singhvi, Mr. Mohit Seth Advs. For the CD : Mr. Illapakurti Navneeth Sharma Adv.

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Page 1 of 15

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(IB)-616 (ND) 2020

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Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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ORDER

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PER SHRI L. N. GUPTA, MEMBER (T)

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Zoom Communication Private Limited (hereinafter referred to as

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the ‘ Applicant/Operational Creditor’ ) has filed this Application under Section 9 of the Insolvency and Bankruptcy Code, 2016 ( ‘IBC, 2016’ ) read with Rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 through its Authorized Representative, Mr. Anil Malhotra with a prayer to initiate the Corporate Insolvency Resolution Process against M/s Par Excellence Real Estate Private Limited (hereinafter referred to as the ‘Corporate

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Debtor/Respondent’ ).

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The Corporate Debtor namely, M/s Par Excellence Real Estate Private Limited with CIN: U70200DL2014PTC271234 is a Company incorporated on 03.09.2014 under the provisions of the Companies Act, 2013, having registered office at DSC-319, DLF, South Court, Saket New Delhi 110017, which falls within the jurisdiction of this Tribunal.

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The Operational Creditor has submitted that the Corporate Debtor has engaged its services in procuring a loan for which it has raised an invoice for an amount of Rs.57,25,000/- including taxes against the Corporate Debtor. Besides, an interest @24% per annum was to be charged from the date of invoice till the payment of the amount.

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Page 2 of 15

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(IB)-616 (ND) 2020

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Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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The Operational Creditor/Applicant has averred the following in

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support of its contention towards existence of the Operational Debt :

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Page 3 of 15

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(IB)-616 (ND) 2020 Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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Page 4 of 15

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(IB)-616 (ND) 2020 Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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Page 5 of 15

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(IB)-616 (ND) 2020 Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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That the detailed particulars of the Operational Debt as provided

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by the Applicant in Part IV of the Application are reproduced below:

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Page 6 of 15

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(IB)-616 (ND) 2020 Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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That the Operational Creditor has submitted that the Corporate

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Debtor made a part-payment of Rs.20,00,000/- only against the debt due and payable and failed to repay the balance amount of Rs.36,25,000/-. Under the circumstances, it was constrained to issue a Demand Notice dated 31.01.2020 under Section 8 of the IBC, 2016 to the Corporate Debtor seeking payment of the unpaid debt amounting to Rs.36,25,000/- along with interest @ 24% p.a. amounting to Rs.29,36,250/-, which was duly served upon the Corporate Debtor. The Corporate Debtor did not reply to the Demand Notice and no notice of dispute or payment of debt has been received by the Applicant. In support of its submission, the Applicant has filed the Affidavit under Section 9(3)(b) of the IBC 2016, which is at page 58-60 of the Application.

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Page 7 of 15

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(IB)-616 (ND) 2020 Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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On issuance of notice, the Corporate Debtor has, however, filed its reply to the present application and objected to the prayer of the Applicant mainly on the ground of Limitation. That the Corporate Debtor has further stated that there is no debt due and payable to the Operational Creditor.

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That for the purpose of crossing the hurdle of Limitation, the Applicant has relied upon the Part-payment made against the invoice amount on 11.08.2016, Letter of Acknowledgement of debt dated 01.04.2017 and the Email dated 12.11.2019 of the Corporate Debtor received by the Applicant.

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That further, the Applicant has filed one IA no. 2245/2020 to bring certain additional documents on record. That these documents were taken on record vide Order dated 17.08.2020 of this Bench.

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That vide aforesaid IA, the Applicant has filed Balance Sheets of the Corporate Debtor for the Financial Years from 2015-16 to 2018-19 to demonstrate the acknowledgement of the debt made by the Corporate Debtor in the Balance Sheets.

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That while examining the Balance Sheet of the Corporate Debtor for the year 2017-18 for the purpose of computing the Limitation, we came across the following disclosure made by the Corporate Debtor regarding the Related Party Transactions :

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Page 8 of 15

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(IB)-616 (ND) 2020

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Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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That from perusal of the aforesaid disclosure at Sl. No. 4 of the Related Party Transactions in the Balance Sheet of the Corporate Debtor, it has emerged that the Applicant Company i.e., Zoom Communication Private Limited is a “Related Party” to the Corporate Debtor i.e., Par Excellence Real Estate Pvt. Ltd., by virtue of both the Companies having common Directors.

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Page 9 of 15

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(IB)-616 (ND) 2020

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Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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However, from the pleadings on record, we notice that neither the Applicant nor the Corporate Debtor has revealed this material fact before this Adjudicating Authority.

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Since the Balance Sheet for the year 2017-18 under reference has been signed by one Mr. Gulshan Kumar Jhurani, Director (DIN: 00209894) on behalf of the Corporate Debtor, therefore, we would like to examine whether Mr. Gulshan Kumar Jhurani (DIN: 00209894) was also a Director in the Applicant Company or not.

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Therefore, at this juncture, we refer to the records available in public domain, free of cost, on the Website of the Ministry of Corporate Affairs (MCA) regarding past and present Directorships of Mr. Gulshan Kumar Jhurani (DIN: 00209894). The scanned copy of the MCA record found on the MCA website is reproduced overleaf :

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(IB)-616 (ND) 2020

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Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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That from perusal of the above, it is clear that Sh. Gulshan Kumar Jhurani (DIN: 00209894) was also the Director in the Applicant Company i.e., Zoom Communications Pvt. Ltd. during the period from 27.03.2006 to 07.08.2017 besides, being Director in the Corporate Debtor Company during the period from 03.09.2014 to 09.01.2017.

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Page 11 of 15

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(IB)-616 (ND) 2020 Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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That from perusal of Part IV of the Application, it is seen that the Operational Debt claimed by the Applicant is arising out of an invoice amounting to Rs.57,25,000 dated 15.12.2015, which was raised by the Applicant for rendering services for procuring a loan from M/s India Bulls Finance. The scanned copy of the invoice is reproduced below :

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That from the conjoint perusal of the MCA record of the Directorship of Sh. Gulshan Kumar Jhurani (DIN: 00209894) and the Invoice raised by the Applicant, it is evident that Sh. Gulshan Kumar Jhurani (DIN: 00209894) was Director in both the Corporate Debtor as

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Page 12 of 15

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(IB)-616 (ND) 2020

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Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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well as the Applicant Company on the date when the invoice under reference was raised and when the default had occurred.

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Hence, it is clear from the aforesaid analysis that both the Applicant Company, which has claimed the operational debt based on an invoice for a loan procured for the Corporate Debtor and the Corporate Debtor against whom the Applicant is seeking to initiate CIR Process were having common Director namely, Mr. Gulshan Kumar Jhurani (DIN: 00209894). By way of visiting the records at the MCA Website and on piercing the corporate veil, it is clear that not only both the Applicant Company as well as the Corporate Debtor were ‘related party’ due to common Directorship on the date of the invoice but also here is a case, where Director of the Corporate Debtor (in the capacity of Director of the Applicant Company) has procured a loan for his own Company and is charging procurement fee therefor. In view of the aforesaid finding, we are of the considered view that the aforesaid transaction, which had taken place between the two related Companies in the year 2015 is sham and the CIR Process cannot be initiated on the basis of such a sham transaction.

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That we are conscious of the provision contained in Proviso to Section 21(2) of IBC, 2016, whereby no right of representation, participation or to vote has been granted to a ‘Related Party’ on initiation of CIRP of the Corporate Debtor. Hence, in our considered view, the related party is having no control in the CIR Process.

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(IB)-616 (ND) 2020

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Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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Therefore, the intention of a related party of initiating the CIR Process shall always raise eyebrows.

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The aforesaid sequence of events shows that the Application for initiating the CIR Process has been filed by concealing a material fact that the Applicant and the Corporate Debtor were related Parties at the time of transaction basing on which operational debt has been claimed. Since, the said transaction has turned out to be a sham transaction, we are of the considered view that both the parties are in collusion and the present Application has not been filed for the resolution of Insolvency rather, the parties have attempted to kickstart the CIR Process with a malicious intent for a purpose other than the resolution of insolvency of the Corporate Debtor, which is not permissible under the IBC 2016. As per the Code, if any person [as defined under Section 3(23) of IBC] initiates the Insolvency Resolution Process fraudulently or with malicious intent for any purpose other than for the resolution of the insolvency, or liquidation and such an act is punishable under Section 65 (1) of IBC 2016. Hence, before taking any action under Section 65(1) IBC 2016, we think it proper to issue a show cause notice, under Rule 59 of the National Company Law Tribunal Rules 2016, to M/s. Zoom Communications Pvt. Ltd. through its Directors and M/s Par Excellence Real Estate Pvt. Ltd. through its Directors and to Mr. Gulshan Kumar Jhurani as to why the penalty as stipulated under Section 65(1) of IBC, 2016 shall not be imposed on them. Ld. Registrar NCLT is directed to issue the show cause notice under Section 65(1) of IBC 2016 read with Rule 59 of the National Company Law Tribunal Rules, 2016 by giving

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(IB)-616 (ND) 2020

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Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

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them fifteen days’ time to explain and submit in writing as to why the penalty as stipulated under Section 65(1) of IBC, 2016 shall not be imposed on them. The Registry is directed to allot a Case No. for the proceedings for which the Show Cause Notice is being issued to the concerned parties under Section 65(1) of IBC, 2016. Registry/ Court Officer to list this matter on 03.06.2022.

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In sequel to the above, the Application is Dismissed with a cost of Rs.2 Lakh to be deposited by the Applicant Company with the Prime Minister Relief’s Fund within a period of 15 days.

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A Copy of this order be sent by the Court Officer to IBBI for their record.

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Sd/Sd/(L. N. Gupta) (Abni Ranjan Kumar Sinha) Member (T) Member (J)

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Page 15 of 15

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(IB)-616 (ND) 2020 Zoom Communication Pvt. Ltd. Vs. M/s Par Excellence Real Estate Pvt. Ltd.

In the matter of Par Excellence Real Estate Private Limited Ib No. 616-ND-2020

Case brief

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In the matter of Par Excellence Real Estate Private Limited Ib No. 616-ND-2020

Case brief

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What did the court decide?

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