NEW DELHI: The NCLAT has affirmed the National Company Law Tribunal’s (NCLT) decision to rescind its earlier ruling regarding an insolvency case against Logix Infrastructure, labeling the debt claim as “fraudulent” and “malicious”.
A two-member NCLAT bench noted that the plea for the Corporate Insolvency Resolution Process (CIRP) against Logix, which is developing the Blossom County project in Noida Sector 137, is grounded in collusion and lacks integrity.
“Given the facts of this case, we see no errors in the NCLT’s orders allowing the Section 65 application from the Respondents. Thus, reversing Section 7 proceedings does not constitute a review masquerading as a fresh decision,” the bench remarked.
Section 65 of the Insolvency & Bankruptcy Code (IBC) permits the NCLT to nullify insolvency proceedings initiated with malicious intent for defrauding or obtaining unfair advantages, with penalties ranging from ₹1 lakh to ₹1 crore for the involved individuals or entities.
On February 6, the Delhi bench of the NCLT retracted its earlier order from July 14, 2023, which mandated the initiation of CIRP against Logix Infrastructure, imposing a ₹55 lakh penalty after establishing a connection between the financial creditor Expert Realty Professionals and corporate debtor Logix Infra.
The NCLT’s directive followed a petition from a homebuyers’ association that alleged collusion between the creditor and debtor.
The decision was contested by Expert Realty Professionals before the appellate tribunal.
The NCLAT rejected the appeal and confirmed the tribunal’s findings, asserting that the real estate company and its creditor “exploited this forum for motives beyond the intended insolvency resolution, acting with purported malicious intent, contrary to the objectives of the IBC, 2016”.
In its 30-page ruling, the tribunal emphasized NCLT’s findings that the financial transaction between Expert Realty and Logix Infrastructure was not legitimate, characterizing the arrangement as fraudulent or malicious, and citing multiple examples of collusion between both parties.
The tribunal also pointed out overlapping roles of directors, noting that one director from Logix held an Additional Director position at Expert Realty from May 12, 2020, to September 5, 2020. He resigned on September 5, joined Logix just six days later, with his resignation officially filed only in April 2021 after a memorandum of understanding (MoU) was signed between the companies.
Furthermore, Hemant Sharma of Logix and Neeraj Gusain, a director of Experts Realty, were partnered in an LLP firm, New Greens Landkart, signing the MoU on behalf of their firms.
“Thus, we find that Hemant Sharma and Neeraj Gusain are related parties,” stated the NCLAT.
The NCLAT further scrutinized the financial records and stated that Expert Realty’s financial statements indicated Logix’s liability of ₹21.16 crore as of March 31, 2021, had reduced to ‘nil’ by March 31, 2022. Notably, a Section 7 petition for the same debt emerged in 2023.
“On April 6, 2023, Expert Realty filed a Section 7 Petition with the NCLT, alleging that Logix defaulted on repayments based on a non-existent MoU and Minute,” the NCLAT noted.
Moreover, the nature of the debt had changed; at the time of alleged disbursement, it was categorized as a Real Estate Allottee, while Expert Realty filed the petition as a financial creditor based on alleged minutes from December 15, 2021.
“It is significant that Logix unambiguously acknowledged the debt and default without objection. In light of the circumstances, we conclude there is collusion between Logix and Expert Realty,” stated the NCLAT.
The appellate tribunal remarked that at the time of executing the MoU and alleged minutes, Logix Infrastructure and Expert Realty were recognized as related parties, and they failed to disclose pertinent facts to the NCLT, engaging in the insolvency process knowingly.
Moreover, the tribunal observed that no resolution plan has been approved as of today, despite FORM-G being issued on October 14, 2023.
“Therefore, based on our discussions, we have no doubt in concluding that the Financial Creditor has invoked the IBC against the Corporate Debtor with fraudulent and mala fide intentions,” the NCLAT declared, affirming their view that the Section 7 application filed by the Financial Creditor was a collusive act, aimed at an ulterior motive.
