NCLT Mumbai Upholds ₹30 Lakh Deposit Forfeiture Over Suppressed Ties With Ex-Management Of Corporate Debtor

The Mumbai bench of the National Company Law Tribunal has dismissed an application filed by Hinganghat Infrastructure Pvt Ltd seeking a direction to the Resolution Professional and the Committee of Creditors (CoC) of Deegee Orchards Pvt Ltd to refund its ₹5 lakh Participation Money Deposit (PMD) and ₹25 lakh Earnest Money Deposit (EMD).

The tribunal held that the company's failure to disclose its relationship and arrangement with the former management of the corporate debtor amounted to a fraudulent practice under the Request for Resolution Plan (RFRP).

A bench of Judicial Member K.R. Saji Kumar and Technical Member Anil Raj Chellan held that the CoC was justified in forfeiting the deposits in exercise of its commercial wisdom.

The tribunal observed, "Thus, we are of the view that non-disclosure of relation and arrangement with the ex-management of the Corporate Debtor amounts to fraudulent practice as defined in Clause 18 of the RFRP, and in such circumstances, it is within the commercial wisdom of the CoC to take a decision on the forfeiture of PMD and EMD."

The Corporate Insolvency Resolution Process (CIRP) against Deegee Orchards commenced on March 3, 2023. Hinganghat Infrastructure submitted its Expression of Interest on October 12, 2023. It deposited a ₹5 lakh PMD and later submitted its resolution plan along with a ₹25 lakh EMD on November 26, 2023.

After the tribunal approved another resolution applicant's plan on May 16, 2024, Hinganghat Infrastructure sought a direction to the Resolution Professional and the CoC of Deegee Orchards to refund the deposits.

The company contended that the Resolution Professional had acted contrary to the RFRP by opening the sealed physical copy of its resolution plan. It argued that both the electronic and physical copies should have been opened only in the presence of the CoC. It also submitted that the CIRP Regulations required unsuccessful resolution applicants to receive a refund of their deposits.

The Resolution Professional and the CoC opposed the plea. They argued that Hinganghat had concealed its relationship with the former management of Deegee Orchards and acted at its behest to obstruct the CIRP. According to them, this conduct attracted Clause 18 of the RFRP, which permits forfeiture where a prospective resolution applicant engages in fraudulent practices.

The tribunal found that the RFRP required prospective resolution applicants to submit both a password-protected electronic copy and a sealed hard copy of the resolution plan.

It also noted that Hinganghat's challenge to the Resolution Professional opening the physical copy had already been rejected by the National Company Law Appellate Tribunal. The Supreme Court later declined to interfere, making that issue final

The tribunal observed, "The aforesaid order of the Hon'ble NCLAT has attained finality on account of the rejection of the appeal preferred by the Applicant before the Hon'ble Supreme Court. In the circumstances, it is evident that the Applicant is only re-agitating the same issue which has attained finality and hence deserves to be rejected. Further, the Applicant has failed to demonstrate that the Respondent No.1 has acted unfairly by the suo motu opening of the Resolution Plan."

Turning to the claim for refund, the tribunal noted that Hinganghat Infrastructure had not disclosed its relationship and arrangement with the former management of Deegee Orchards.

It recorded that the application had been filed through its authorised representative, Alok Goenka, who occupied premises owned by the corporate debtor. The tribunal also noted that the applicant's annual report for the financial year 2022-23 showed that Mr. Alok Goenka was a related party of the corporate debtor.

The tribunal held that the omission amounted to a fraudulent practice within the meaning of the RFRP. It further noted that the CoC had resolved with a 92.88 per cent voting share to seek forfeiture of the PMD and EMD.

The tribunal also noted that it had earlier declined to interfere with the CoC's decision to forfeit the deposits. The deposits have since been distributed among the CoC members in proportion to their voting shares.

Holding that there was no reason to interfere with the CoC's commercial decision at this stage, the tribunal dismissed the application without any order as to costs.

For Applicant: Advocates Nausher Kohli and Advocate Abdullah Qureshi.

For Respondent: Advocate Bilal Ali

For UCO Bank: Advocate Prakash Shinde a/w Ruchita Jain.