NEW DELHI, Feb 9: In an unusual action, the NCLT has revoked its own order from July 2023 that had initiated insolvency proceedings against the real estate company Logix Infrastructure, stating the request was made with “fraudulent and mala fide intentions” through a collusive petition by the financial creditor.
NCLT pointed out a “nexus and connection” between the financial creditor, Experts Realty Professionals, and their insolvency application against Logix Infrastructure, declaring the entire process as “orchestrated” and manipulated “with purported malicious intent”.
The tribunal described the insolvency petition as being filed “with an ulterior motive” and asserted that the financial creditor had misused the forum for objectives other than the genuine resolution of insolvency, which contradicts the goals of the IBC.
The National Company Law Tribunal (NCLT) has called for a comprehensive investigation by the Serious Fraud Investigation Office (SFIO), urging a thorough examination of the alleged fraudulent and collusive actions.
“We believe that the Section 7 application numbered IB-237(ND)/2023 submitted by the financial creditor (Experts Realty Professionals) is a collusive application in concert with the corporate debtor (Logix Infra), carried out with an ulterior motive,” stated the NCLT.
Previously, on July 14, 2023, the NCLT initiated a Corporate Insolvency Resolution Process (CIRP) against Logix Infrastructure after accepting a claim of default on debt repayments from Experts Realty Professionals.
On the recent Thursday, the NCLT retracted its July 2023 ruling, issuing a new directive to “restore the management of the corporate debtor’s affairs to the ex-management/suspended board of directors of the corporate debtor”.
The NCLT also stipulated that if any resolution plan has been presented by successful bidders, the Resolution Professional is to refund the earnest money deposit along with the performance bank guarantee provided by them within one week.
Additionally, the tribunal has ordered the financial creditor to cover all costs, fees, and expenses of the Resolution Professional within a week.
Moreover, the insolvency tribunal slapped a penalty of Rs 5 lakh on the financial creditor, requiring it to deposit this sum into the Prime Minister’s National Relief Fund (PMNRF) within ten days from the issuance of this order.
The NCLT’s recent ruling was influenced by an application from allottees in the Logix Blossom Country project, urging the tribunal to annul the insolvency process, claiming it was initiated with fraudulent and malicious intents to deceive creditors and flat allottees.
They highlighted two key individuals as related parties: Hemant Sharma, an Additional Director in Experts Realty Professionals, who served as the financial creditor between May 12, 2020, and September 5, 2020, and was appointed as a director in Logix Infra on September 11, 2020.
They also contested the Memorandum of Understanding (MoU) dated October 20, 2020, concerning a consideration of Rs 15 crore, and the minutes from a meeting on December 15, 2021, under which Logix Infrastructure sold allocated units to a financial creditor, arguing these documents exhibit multiple deficiencies.
The tribunal noted that the MoU and its corresponding minutes lacked necessary stamp paper, emphasizing that, per the Stamp Act, such agreements mandate at least Rs 100 in stamp duty.
Supporting the allottees’ claims, the NCLT expressed: “We find that this casts doubts on the authenticity and genuineness of the MoU dated October 20, 2020, and the minutes dated December 15, 2021. Hence, these documents lack credibility for the financial creditor in the primary Section 7 Application.”
The NCLT further indicated that the applicants presented solid evidence pointing to fraud or harmful intentions by Experts Realty Professionals against Logix Infrastructure, with the explanations given by the financial creditor failing to convince.
“Upon reviewing the master data and the documents provided by the applicants concerning the financial creditor … we acknowledge the claim … that a connection exists between the financial creditor and the corporate debtor,” the NCLT stated.
The NCLT discovered that the related party transactions manipulated activities of both the corporate debtor and the financial creditor, as noted by the two-member NCLT bench comprising members Atul Chaturvedi and B V Balram Das.
“Initially, both companies were overseen by independent individuals; however, the simultaneous modifications in Key Managerial Personnel (KMPs) in both companies, including resignations at the financial creditor and appointments at the corporate debtor, are notable and exemplify their conduct,” stated the NCLT in its 18-page ruling. (PTI)
