NCLAT upholds order recalling insolvency case against Logix Infra

New Delhi, Sep 13 (PTI) Appellate tribunal NCLAT has upheld the decision of the National Company Law Tribunal (NCLT) to recall a previous ruling for an insolvency case against real estate firm Logix Infrastructure after finding the debt claim as "fraudulent" and "malicious".

A two-member NCLAT bench said the plea for CIRP (Corporate Insolvency Resolution Process) against Logix Infrastructure, which was developing the Blossom County project in Noida Sector 137, are based on collusion and are malicious with sufficient material.

"In the facts and circumstances of the case, we do not find any infirmity in the orders of the adjudicating authority (NCLT) allowing the Section 65 application filed by the Respondents. For the reasons noted herein, we find that reversing of Section 7 proceedings doesn't amount to a review in the guise of a fresh determination," the bench said.

Section 65 of the Insolvency & Bankruptcy Code (IBC) allows the NCLT to set aside the insolvency proceedings filed with a malicious intent to defraud or gain an unfair advantage under section 7 or section 9 and to impose penalties, ranging from Rs 1 lakh to Rs 1 crore, on those individuals or entities.

On February 6 this year, the Delhi-bench of NCLT had recalled its earlier order passed on July 14, 2023 directing to initiate CIRP against Logix Infrastructure and imposed a penalty of Rs 55 lakh after finding that the financial creditor Expert Realty Professionals and corporate debtor Logix Infra were connected parties.

NCLT direction came after the petition filed by a homebuyers' association, which alleged collusion between the financial creditor and debtor.

The NCLT order was challenged before the appellate tribunal by Expert Realty Professionals.

The NCLAT, which dismissed the appeal and upheld the findings of the tribunal, said the realty firm and its financial creditor "used this forum for purposes other than the insolvency resolution of the Corporate Debtor with purported malicious intent, contrary to the objectives of the IBC, 2016".

The appellate tribunal in its 30-page order also noted the NCLT's finding that the loan transaction between Experts Realty and Logix Infrastructure was not genuine and "the financial arrangement was fraudulent or malicious in nature", while highlighting several instances of collusion between the two entities.

Moreover, the tribunal also noted overlapping roles of directors. It observed that one of the directors of Logix was holding the position of Additional Director in Experts Realty from May 12, 2020 to September 5, 2020. He resigned on September 5, 2020, and joined Logix just six days later as the Director of the company. His resignation was officially filed only in April 2021, after a memorandum of understanding (MoU) signed between the two companies.

Besides, Hemant Sharma of Logix and Neeraj Gusain, director of Experts Realty, were partners in one LLP firm, New Greens Landkart. Both signed the MoU on behalf of their companies.

"We thus find that Hemant Sharma and Neeraj Gusain are related parties," said NCLAT.

The NCLAT also examined the financial documents and said the financial statements of Expert Realty reveal that the liability of the Logix, which was Rs 21.16 crore as on March 31, 2021 has come down to 'nil' on March 31, 2022. The NCLAT also noticed that for the same debt, Section 7 petition was filed in 2023.

"We note that on April 6, 2023 appellant Expert Realty filed a Section 7 Petition before the NCLT alleging failure of Respondent No 1 (Logix) to repay the due amount arising out of the MoU dated 20.10.2020 & Minute dated 15.12.2021, which didn't exist in the books of accounts," said NCLAT.

Moreover, investment has changed its form as at the time of alleged disbursement, nature of debt was Real Estate Allottee but Expert Realty filed the petition as financial creditor by relying on alleged minutes dated December 15, 2021.

"Furthermore, it is to be noted that Corporate Debtor Respondent-Logix candidly admitted the debt and default without raising any objection. In the above background we are compelled to come to a conclusion that this is nothing else but collusion between Logix and Expert Realty," said NCLAT.

The appellae tribunal said at the time of execution of the MoU and alleged minutes, Logix Infrastructure and Expert Realty were related parties and being aware of the same they deliberately did not disclose the clear facts of the case to the NCLT and participated in the insolvency proceedings.

It also observed that in the present case there is also no resolution plan approved till date, even though FORM-G was issued way back on Octover 14, 2023.

"Therefore, in view of our discussion, we have no hesitation in holding that the Financial Creditor has invoked the provisions of IBC against the Corporate Debtor with fraudulent, mala fide intention," said the NCLAT, adding, "We are therefore of the considered view that the Section 7 application... filed by the Financial Creditor is a collusive application filed, in collusion with the Corporate Debtor with an ulterior motive." PTI KRH HVA