Case Law Details

Case Name : Anant Kajare Vs. Eknath Aher & Anr.(Supreme Court)
Appeal Number : Civil Appeal No(s). 20971/2017
Date of Judgement/Order : 26/04/2018
Related Assessment Year :
Courts : Supreme Court of India (999)

Anant Kajare Vs. Eknath Aher & Anr. (Supreme Court)

Battery of lawyers appeared in the high profile alleged ‘Ponzi scheme’ matter. This matter has been travelling to Supreme Court time and again. Previously, SEBI held that the scheme run by Citrus Check inn Limited and Royal Twinkle Star Club Limited alleged to be in the nature of ‘Collective Investment Scheme’ (CIS) which was challenged before SAT and SC. Therafter, SC had directed SEBI to conclude the investigation within 6 months. In the meantime, customers who had bought time sharing plan from the companies approached NCLT Mumbai for initiation of insolvency proceedings against the company and the insolvency proceedings commenced. Since, this was the first such matter wherein the financial creditors were NIL and the huge base of alleged 18 lakhs ‘investors’ were  involved and were classified as “Operational Creditors” by the NCLT, the question came before the Resolution Professional of constituting the Committee of Creditors to steer the process. It was first such unique case wherein the Operational creditor of almost equal amounts were to be considered. Regulation 16 of the CIRP regulations which specified that in case of no financial creditors the COC shall be of top 18 operational creditors. Resolution Professional (RP), Mr. Devendra Jain says, it was difficult to constitute COC of only 18 operational creditors and proceed. Hence, he constituted the COC by taking representatives from different groups of investors for better representations. Also, he made an advisory committee of retired bankers and legal professionals to guide the process. After, conducting the due diligence and forensic audit the RP was able to unearth assets worth Rs.3500 Crores out of outstanding of Rs. 6000 Crores(approx).

Some investors approached NCLT and NCLAT to challenge the proceedings alleging that SEBI is the appropriate authority and the same should be given the charge. Earlier on previous occasion Court had directed RP and SEBI to file progress report and investigation report which formed the basis for hearing on the high profile case.

SC after hearing senior advocate Mr. Shyam Divan who appeared for investors, Mr.Tushar Mehta for SEBI and Mr. KV Vishwanathan for Resolution Professional concluded that the work done by RP is considerable and in case any assets remain unidentifiable the same may be brought to his notice. SC ordered to held meeting of investor representative, SEBI representative with RP to bring out an amicable solution. Upholding the spirit of the Code SC has reposed faith in the process of IBC and held that the Liquidation of the assets should be done through the same. Meanwhile, RP who had moved application before Hon’ble NCLT Mumbai and got the travel ban of promoters of the two companies and  also got prohibition order absent the sale or transfer of properties purported to be held in the sister concern companies.

Advocate Nipun Singhvi appearing for the RP apprised that the RP doesn’t have any interest in the concerned companies and allegations made against the process are baseless. The IBC has infact helped the investors by getting the properties which otherwise would have taken years to be unearthed. It is in the best interest of all the stakeholders to come together and resolve the situation rather than stalling process since the matter has faced multiple litigations. Many of the investors have got freezer order from court which has led to cash crunch with the RP and the employees of the companies are in precarious situation. SC has also directed to approach appropriate forum for defreezing the bank account for defraying the operational expenses under the leadership of RP.

Prateek Gattani, Chartered accountant and associate of RP, stated that IBC has helped and NCLT has done commendable job to direct deposition of Passport before the Registry and prohibit the sale of immovable assets which has given new ray of hope to inventors who had been left high and dry because of non-payment.

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Category : Corporate Law (4042)
Type : Judiciary (12080)
Tags : bankruptcy code (281) SEBI (575) supreme court judgements (1250)

6 responses to “SC ask IBC and SEBI to join Process in ‘Ponzi scheme’ matter”

  1. Nikita says:

    This a misguided article.

  2. Nikita says:

    The Supreme Court in it’s order has not upheld anything. After hearing the concerns of the petitioner and after being satisfied that the money is being shiponned off to other group companies Supreme Court advised the representative of the petitioners SEBI and the RP to conduct a meeting to discuss the concern. This is obviously without prejudice to the contentions raised in the SLP. The meeting shall not be constituted a COC.

  3. Lakshminarayanan says:

    Remarkable order but my opinion GOVT authority managed to arrest Gaurav Goenka then all the customers will get their Money Back with no hesitation.

  4. Deepak anandpara says:

    There is one loophole in the IBC code. As such there is moratorium period for corporate debtor not to transfer any assets or alienate and create any third party right agst. the assets held in the name of corporate debtor.but any assets which is in the name of so many companies / sister concerns can be easily sold and RP is unable to do anything.just as the thing may have happened in this case.Hence in order to protect the interest of creditord/investors an immediate order should be given to RP that no assets are being sold in the name of sister concern which is easily visible and in this case it was very much visible from the first day.RP has done his maximum to safeguard the public interest but due to the unavailability of any provisions in the code he has to just watch wherein cash portion of the assets sold are not coming in the hands of investors.

  5. Deepak anandpara says:

    Make available maximum amount to investors by unearthing the hidden assets .

  6. Deepak anandpara says:

    Sebi has regarded this scheme as CIS.And all documents in the form of affidavit or communication from NCLT court regard the collection of amount by corporate debtor as their business activities which were engaged in the business of providing holiday facilities and not PONZY SCHEME.Not a single assets is unearthed till today all assets were declared by promoter himself. If any assets are unearthed and made available to investors for payment after the through investigation of cash flow given under under the name of forensicaudit then it shall be beneficial for investors and their claim may be paid maximum. Supreme court has given the order in such a way that all respective authorities should come together and Rigorious and through investigation of cash flow should be done to unearth the maximum assets and case of money laundering if any or benami transaction if any in the public interest.LAW has once again proved that it can go into the heart of problem and make available solution.

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