Mr. Palanigounder Eswaramoorthy Vs Mr. Subbaraya Ananthar Durairaju & Ors. - The Hon'ble Supreme Court in the case of Anuj Jain Vs. Axis Bank Ltd. (2020) 8 S.C.R. 291 has noted that even in cases where the tests under Section 43(2) and Section 43(4) are satisfied, the same may not be treated as a preferential transaction if it falls within the scope of the exception set out in Section 43(3) of IBC which provides for transfer made in the ordinary course of business or financial affairs of the Corporate Debtor or the transferee.

 NCLT Chennai-1 (2025.01.30) in Mr. Palanigounder Eswaramoorthy Vs Mr. Subbaraya Ananthar Durairaju & Ors. [IA/238(CHE)/2022 in IBA/203/2020] held that;.

• Thus, the preliminary enquiry which this Adjudicating Authority is required to do is to first ascertain as to whether the Corporate Debtor has given any preference and whether the preference has happened during the relevant time.

• The Hon'ble Supreme Court in the case of Anuj Jain Vs. Axis Bank Ltd. (2020) 8 S.C.R. 291 has noted that even in cases where the tests under Section 43(2) and Section 43(4) are satisfied, the same may not be treated as a preferential transaction if it falls within the scope of the exception set out in Section 43(3) of IBC which provides for transfer made in the ordinary course of business or financial affairs of the Corporate Debtor or the transferee.

Excerpts of the Order;

This application IA/238(CHE)/2022 has been filed by the Liquidator under Section 43(1) and 45(1) of IBC seeking the following reliefs.

• a. To direct the Respondents 1 to 3 to pay a sum of Rs. 94,32,633/- being amounts covered under the above transactions together with interest at 12% p.a. from 06.09.2021 till the date of realization.

• b. To direct the Respondents 1 to 3 to return the Skoda car back to the Corporate Debtor or in the alternative pay a sum of Rs. 18.61 Lakhs with interest from 06.09.2021 till the date of realization.

BRIEF FACTS OF THE CASE

# 2. The facts relating to disposal of the application are that on an application filed by the Financial Creditor M/s. Indian Overseas Bank under Section 7 of IBC, this Tribunal directed the initiation of CIRP against the Corporate Debtor M/s. Subhashri Bio Energies Pvt Ltd vide an order dated 02.09.2021. The RP while discharging his functions during the CIRP appointed one KSPV & Co., Chartered Accountants, to conduct a transaction audit of the Corporate Debtor. The above firm submitted its report to the RP annexed as Annexure A2. On the basis of the report the RP filed the above application. Subsequently, this Tribunal ordered for the commencement of the liquidation proceedings against the Corporate Debtor vide an order dated 28.04.2022 and appointed Shri. Palanigounder Eswaramoorthy as the Liquidator. The RP was later substituted by the Liquidator vide order dated 09.05.2024.

# 3. It is stated that as per the transaction audit report and the books of accounts of the Corporate Debtor, a sum of Rs. 11,41,767/- is due and payable by R3 / Mr. Salaisivaprakasam, being the amount advanced by the Corporate Debtor during the look back period of 2019 – 2021 as detailed below.  . . . . . . . 

It is stated that the Corporate Debtor had to pay several other Creditors, but the said sum was paid to R3 without any commercial transactions which attracts Section 43.

# 4. It is stated that the RP had taken over the management of the Corporate Debtor on 06.09.2021. The cash balance as on 02.09.2021 was shown as Rs. 33,61,422/- which cash was not handed over to the RP and was diverted by the Suspended Directors i.e. R1 to R3. It is further stated that on 01.04.2018, the CD had purchased a Hyundai Creta bearing registration No. KA 03 NC 5044. It sold the vehicle on 02.07.2021 to N. Kandasamy on a loss of Rs. 4,02,913/-, although, the quoted price was Rs. 6.25 Lakhs at online site. It is stated that the car was sold for Rs. 2.5 Lakhs and is being used by R3. 

# 5. It is further stated that the Corporate Debtor had purchased a Skoda car on 02.04.2012 for a sum of Rs. 18,61,529/-. It was sold for Rs. 2.5 Lakhs on 20.12.2020 to one Mr. Natarajan. Though the car was purchased in the name of the Suspended Director but the loan and asset were booked in the name of Corporate Debtor and instalments were paid by the Company as such the Company was the owner of the car which is still being used by Respondent No. 1.

# 6. It is stated that R1 to R3 sold the vehicles one year prior to CIRP date without any justification as detailed below. . . . .  . . 

It is stated that there is no justification for the sale of above vehicles for Rs. 30,42,000/- and the said transactions squarely fall under Section 45 of the IBC.

# 7. It is stated that the Corporate Debtor had given advances to its employees as per books who are related parties and it did not effect any recovery from them. . . .  , . . . 

It is stated that the above amount has not been recovered from the parties who are related to R1 and R3. The possibility of receiving the said sum by R1 to R3 in their personal account cannot be ruled out. 

# 8. It is stated that the above transactions were not carried out in the ordinary course of business. It is stated that the secured creditors had advanced loan facilities of Rs. 164,66,66,835/- and the transactions carried out by the Suspended Directors are either the preferential transactions or the undervalued transactions for enriching themselves falling under Section 43 and 45 of IBC.

# 9. In reply to the application, it is stated that the Respondents had already responded to the Liquidator vide clarifications letters dated 21.12.2021 and 28.12.2021 with respect to the transaction audit report. It is stated that the Respondents had been working in the earnest interest of the Company. Every act of the Respondents was governed by prudence. It is stated that entire records relating to the Company are in the possession of the Applicant. The Respondents had assured that there was full transparency in their dealings. It is stated that the Respondents had taken the decisions that they genuinely felt were in the interest of the Company at that point of time based on the sound professional advice. The allegations are purely speculative and presumptuous.

# 10. A seizure mahazar has also been filed by the Suspended Directors vide Sr. No. 219 dated 13.01.2023 enclosing the clarifications submitted to the audit report which is reproduced as under. . . . . . . .

# 11. It is stated that the Directors remunerations taken from the Company all along 15 years were minimal. They whole heartedly worked for the upliftment of the project, personally invested their entire resources more than Rs. 10.0 Crores in the project hoping for a bright future. The Executive Director of the Company Mr. Salaisivaprakasam is M.S., having lucrative job receiving Rs. 18 Lakhs in UK, came to India to develop the project on their request. They had no mal-intentions or motives. It is stated that insurance claim on the project assets is yet to be settled and the Directors have been fighting to recover the value of the assets by paying the Arbitrator fee of Rs. 45 Lakhs even though the Bank stopped funding. They also submitted the clarifications which are reproduced as under.

# 12. We have heard Ld. Counsels for the parties and perused the records.

# 13. Section 43 of IBC provides as under.

• 43. Preferential transactions and relevant time. –

• (1) Where the liquidator or the resolution professional, as the case may be, is of the opinion that the corporate debtor has at a relevant time given a preference in such transactions and in such manner as laid down in sub-section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential transactions and for, one or more of the orders referred to in section 44.

• (2) A corporate debtor shall be deemed to have given a preference, if– (a) there is a transfer of property or an interest thereof of the corporate debtor for the benefit of a creditor or a surety or a guarantor for or on account of an antecedent financial debt or operational debt or other liabilities owed by the corporate debtor; and (b) the transfer under clause (a) has the effect of putting such creditor or a surety or a guarantor in a beneficial position than it would have been in the event of a distribution of assets being made in accordance with section 53 

• (3) For the purposes of sub-section (2), a preference shall not include the following transfers– 

• (a) transfer made in the ordinary course of the business or financial affairs of the corporate debtor or the transferee;

• (b) any transfer creating a security interest in property acquired by the corporate debtor to the extent that –

• (i) such security interest secures new value and was given at the time of or after the signing of a security agreement that contains a description of such property as security interest, and was used by corporate debtor to acquire such property; and

• (ii) such transfer was registered with an information utility on or before thirty days after the corporate debtor receives possession of such property:

• Provided that any transfer made in pursuance of the order of a court shall not, preclude such transfer to be deemed as giving of preference by the corporate debtor.

• Explanation. – For the purpose of sub-section (3) of this section, “new value” means money or its worth in goods, services, or new credit, or release by the transferee of property previously transferred to such transferee in a transaction that is neither void nor voidable by the liquidator or the resolution professional under this Code, including proceeds of such property, but does not include a financial debt or operational debt substituted for existing financial debt or operational debt.

• (4) A preference shall be deemed to be given at a relevant time, if – 

• (a) It is given to a related party (other than by reason only of being an employee), during the period of two years preceding the insolvency commencement date; or

• (b) a preference is given to a person other than a related party during the period of one year preceding the insolvency commencement date.

# 14. Perusal of Section 43 of IBC, 2016 contemplates that where the liquidator or the resolution professional is of the opinion that the corporate debtor has at a relevant time given a preference in such transaction and in such manner as laid down in sub – section (2) to any persons as referred to in sub-section (4), he shall apply to the Adjudicating Authority for avoidance of preferential transaction and for, one or more of the orders referred to in Section 44. Thus, the preliminary enquiry which this Adjudicating Authority is required to do is to first ascertain as to whether the Corporate Debtor has given any preference and whether the preference has happened during the relevant time.

# 15. As per Section 45 of IBC, following transactions are considered to be undervalued.

• (a) A gift to any person

• (b) A transaction which involves the transfer of one or more assets by the Corporate Debtor for a consideration, the value of which is significantly less than the value of the consideration provided by the Corporate Debtor. 

# 16.TRANSACTIONS WITH MR. DURAIRAJU SALAISIVAPRAKASAM

16.1 It is alleged in the application that as per the transaction audit report nd the books of accounts, a sum of Rs. 11,41,767/- is due and payable by  Respondent No. 3 which amount was advanced by the Corporate Debtor while under the management of the Suspended Directors in 2019-20 and 2020- 21 during the look back period, although the Corporate Debtor had to pay to several other creditors.

16.2. In reply, it has been explained by the Suspended Directors that the Bankers did not allow them the operations in the running accounts since 2016. With the knowledge of the Banker, the Company started operating current account with Karur Vysya Bank. It was also attached and frozen by the Income Tax Department as TDS was due to them. The Company had no other alternative than to receive the amount from the Debtors in the account of D. Salaisivaprakasam who used to make payments to the Creditors and expenses to continue the activities of R&D project. The balance outstanding of Rs. 11,41,767/- is to be adjusted with expenses and balance is payable to Mr. Durairaju for Rs. 11,42,425/- as on 31.03.2020. The balance adjustment was made between the two in respect of which entries are yet to be recorded in the books.

16.3. Looking into the explanation, we find that the transactions were carried out to run the activities of R&D project without any hindrance. No preferential transaction can be stated to have been made to benefit the Directors or the related parties. These transactions were done in the usual course of business for running the Company as a going concern. There is no question of giving preference in the above transactions or putting the other party in a beneficial position. It has also been explained that the entries are yet to be recorded in the books.

# 17. CASH BALANCE OF RS. 33,61,422/- NOT HANDED OVER TO THE RP

17.1 It is alleged that as on 06.09.2021 when the RP took over the management of the Corporate Debtor, a cash balance of Rs. 33,61,422/- as on 02.09.2021 was shown which was not handed over and was diverted by the Directors.

17.2. On this aspect, the Directors have given a detailed reply at page 6 para 2 of the Memo filed vide Sr. No. 219 dated 13.01.2023 which need not be reiterated. It is stated that the Corporate Debtor had not finalized the accounts for FY 2020-2021 since GST Officials had taken the records of the Corporate Debtor to their office on 07.03.2021 which have not been returned yet. The Company had also filed the writ petition before the Hon'ble High Court to direct the Bank to permit the operations of the current account which is pending. It is stated that the Bank had not allowed the Company to operate the accounts and for this reason the cash in hand was deposited in the Directors account which was paid to the Insurance Arbitrators (Rs. 22.50 Lakhs), Shriram Finance (Rs. 23.33 Lakhs) and to the Advocates appearing for the Corporate Debtor in the arbitration case, TANGEDCO and Shriram Finance. It was stated that the above transactions are to be given effect in tally

17.3. On a consideration of the explanation and the record, we find that though the said act of the Directors is in violation of moratorium under Section 14 of IBC but the said transactions were done in the interest of the Company in the ordinary course of business, out of necessity since the Insurance Arbitrator and fee of the Advocates were to be paid and the Bank had not allowed the operations. Since the records were seized by the GST, the transactions could not be effected in the tally. There is nothing to show that any benefit was derived by the Suspended Directors out of the said transactions. At the best, the said transaction can be said to be in violation of the moratorium under Section 14 of IBC and not the preferential transaction as alleged.

PURCHASE AND SALE OF HYUNDAI CRETA CAR KA 03 NC 5044 AND SKODA CAR

AND SALE OF VEHICLES

# 18. It is alleged that on 01.04.2018, the Corporate Debtor had purchased Hyundai Creta car, however the Directors sold the vehicle on 02.07.2021 to one Mr. N. Kandasamy and booked a loss of Rs. 4,02,913/-. On online site, the price for the car was quoted at Rs. 6.25 Lakhs, but it was sold for Rs. 2.75 Lakhs and it is being used by Mr. Salaisivaprakasm, one of the Suspended Director. Further, the Corporate Debtor had purchased a Skoda car on 02.04.2012 for Rs. 18,16,529/- which was sold by the Suspended management for Rs. 2.50 Lakhs on 20.12.2020 to Mr. Natarajan. It is stated that the car is still being used by Respondent No. 1. It is also alleged that the Suspended Directors also sold the vehicles one year prior to CIRP as detailed in para 6 of the order for Rs. 30,42,000/- without any justification.

# 19. To this effect, the Suspended Directors have given an explanation that the financier of the Creta car had pressurized the Company to pay the balance amount outstanding in the loan account, lest the vehicle will be seized and put to auction. To avoid this, the Company decided to sell the vehicle on distress sale to settle the loan amount of HDFC Bank which letter was given by the HDFC Bank. As regards sale of Skoda car, it was purchased on 02.04.2012 and sold on 20.12.2020.

19.1 On a consideration of record and the explanation, we do not find these transactions to be the undervalued transactions. The transactions were made to settle the dues of HDFC Bank since there was a threat for lifting the vehicle and putting it for auction. It cannot be said that the Suspended Directors derived any benefit out of the sale transaction. It was a distress sale out of compulsion. There is no record to show that the vehicle is in possession of the Suspended Directors as alleged. The Applicant has not placed any document to show that there was online quote price of the vehicle as Rs. 6.25 Lakhs. 

# 20. As regards the Skoda car, after a period of 8 years, such like cars do not have much value. Their depreciation is high. Further there is no document to show that the car is being used by the Suspended Directors as alleged or it could fetch more price than the price at which the car was sold. The amount was duly brought to the accounts of the Corporate Debtor after the sale. That being the position, it cannot be said that the Respondents benefitted from the above sale.

20.1 As regards sale of other vehicles, it is explained that the sales were effected during the normal course of business. The Bank had stopped the operations of the current account. Considering the reply, the said transactions cannot be said to be the preferential transactions.

ADVANCE GIVEN TO THE EMPLOYEES AMOUNTING TO RS. 14,34,444/-

# 21. Admittedly, the said amount was given to the employees which has not been recovered yet but the said amount was given in the usual course of business for smooth running of the operations of the Company. The above transactions do not indicate that the above persons are the related parties of the Suspended Directors or the said sums were received by the Suspended Directors through them in their personal accounts.

# 22. It is true that the Sole Creditors had advanced various facilities and a total sum of Rs. 164.67 Crores stand in the name of the Corporate Debtor but the transactions as alleged above do not fall under the definition of either preferential or undervalued transactions. Rather the same appear to have been made in the normal course of business for the day to day operations of the Company and these transactions did not benefit the Respondents or made them unjustly rich. It has been submitted by the Suspended Directors / Respondents that they whole heartedly worked for the uplift of the project diverting maximum resource for the project. They also invested in the project hoping for a bright future for a socially and environmentally benign project, but unfortunately the project did not work to their expectation. The Hon'ble Supreme Court in the case of Anuj Jain Vs. Axis Bank Ltd. (2020) 8 S.C.R. 291 has noted that even in cases where the tests under Section 43(2) and Section 43(4) are satisfied, the same may not be treated as a preferential transaction if it falls within the scope of the exception set out in Section 43(3) of IBC which provides for transfer made in the ordinary course of business or financial affairs of the Corporate Debtor or the transferee.

# 23. Having considering the above facts and the responses in totality in the given circumstances, we do not find any merit in the application IA/238(CHE)2022 and dismiss the application IA/238(CHE)/2022 with no orders as to cost.

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Mr. Palanigounder Eswaramoorthy Vs Mr. Subbaraya Ananthar Durairaju & Ors. - It is apt to refer that as per explanation to section 66 of the IBC, the NCLT is mandated to presume that all directors and partners of the corporate debtor have exercised necessary care and proper due diligence in conducting the affairs of the corporate debtor and the burden of proof is on the liquidator or the resolution professional, as the case may be, to show that the conduct of the partner or director, was not reasonable and was not in exercise of appropriate due diligence. Where, the resolution professional or the liquidator is unable to establish the same, then, in such circumstances, the statutory presumption as set out in the Explanation, operates in favour of the partner or director and the application under section 66 of the IBC, against such persons ought to be dismissed, on account of such statutory presumption.

 NCLT Chennai-1 (2025.01.30) in Mr. Palanigounder Eswaramoorthy Vs Mr. Subbaraya Ananthar Durairaju & Ors. [IA/249(CHE)/2022 in IBA/203/2020] held that;.

• The RP has made the bald assertions to show that the business of the Corporate Debtor was carried out by the Respondents with a dishonest intention and to defraud the creditors.

• It is apt to refer that as per explanation to section 66 of the IBC, the NCLT is mandated to presume that all directors and partners of the corporate debtor have exercised necessary care and proper due diligence in conducting the affairs of the corporate debtor and the burden of proof is on the liquidator or the resolution professional, as the case may be, to show that the conduct of the partner or director, was not reasonable and was not in exercise of appropriate due diligence. Where, the resolution professional or the liquidator is unable to establish the same, then, in such circumstances, the statutory presumption as set out in the Explanation, operates in favour of the partner or  director and the application under section 66 of the IBC, against such persons ought to be dismissed, on account of such statutory presumption.

• As a matter of fact, the 'aspect' of 'Fraudulent Trading' requires a very ‘High Degree of proof’, which is attached to the 'Fraudulent Intent’. To put it emphatically, a more compelling "Material' / 'Evidence' is required to satisfy the conscience of this ‘Tribunal', 'on a preponderance of probability’

• In the light of what has been stated above, we are of the view that the Applicant / RP / Liquidator has not made a case of fraud or dishonest intention on the part of the Respondents except making sweeping allegations and hence Section 66 of IBC, 2016 cannot be invoked under such circumstances. The present Application is liable to be dismissed.

Excerpts of the Order;

This application IA/249(CHE)/2022 has been filed by the Liquidator under Section 66(1) of IBC seeking the following reliefs.

• a. To direct the Respondents 1 to 3 to pay a sum of Rs. 4,58,85,940.8/- being amounts covered under the above transactions together with interest at 12% p.a. From 03.09.2021 till the date of realization.

BRIEF FACTS OF THE CASE:

# 2. The facts relating to disposal of the application are that on an application filed by the Financial Creditor M/s. Indian Overseas Bank under Section 7 of IBC, this Tribunal directed the initiation of CIRP against the Corporate Debtor M/s. Subhashri Bio Energies Pvt Ltd vide an order dated 02.09.2021. The RP while discharging his functions during the CIRP appointed one KSPV & Co., Chartered Accountants, to conduct a transaction audit of the Corporate Debtor. The above firm submitted its report to the RP annexed as Annexure A2. On the basis of the report, the RP filed the above application. Subsequently, this Tribunal ordered for the commencement of the liquidation proceedings against the Corporate Debtor vide an order dated 28.04.2022 and appointed Shri. Palanigounder Eswaramoorthy as the Liquidator. The RP was later substituted by the Liquidator vide order dated 09.05.2024.

# 3. It is stated that as per the transaction audit report, it was found that the Respondent No. 1 to 3 (Suspended Directors of the Corporate Debtor) had written off advances of Rs. 37,75,883.19 given to SBEL Power Consultancy India Pvt. Ltd., a related party in which R2 and R3 were the Directors which transaction was unwarranted. Similarly, Suspended Directors transacted with Subhashri Organics India Pvt. Ltd, a related party as one of the Directors namely Ms. Salai Sivamalar is related to the Suspended Directors R1 to R3 which transactions were the sham transactions since the Company had been struck of on 10.07.2017. It is stated that the transactions with the struck off company continued till 03.12.2018. It is stated that an amount of Rs. 21,35,581/- is due from Subhashri Organics India Pvt. Ltd and payable by the Suspended management. They also removed the stocks from the Company even though the financial condition of the Company was poor and this was done with a dishonest intention to defraud the Creditors. It is stated that the erstwhile management wrote off the advances of Rs. 13,25,050/- to M/s. Mark IV Animation Studio Pvt. Ltd. without any reason, though the company was in distress which transactions are not supported by bills. It is further stated that the Suspended management wrote off a sum of Rs. 23,74,830/- given to Subhashri Export Division, an export division of the Corporate Debtor. It is stated that the transactions are not supported by any documentary evidence and the business of export division is not connected with the core business of the Corporate Debtor. It is stated that the Corporate Debtor had given an advance of Rs.8,39,983/- to Alligator Automations in 2013-14 and on 01.07.2017, the sums were written off without any reason. The Suspended management also granted advances to an extent of Rs.29,76,172/- to various suppliers as under. However, on 01.07.2017, the sums were written off without any reason. It is alleged that huge amount was written off. This clearly shows that these amounts were used to siphon away the money attracting Section 66 of IBC. 

# 4. It is stated that transaction of Rs. 21,75,030/- was entered into with Mr. Kumaravel towards vehicle loan and powder plant. The vehicles were purchased in the name of Kumaravel and the funds were paid by the Corporate Debtor. The Suspended management created third party assets from the Corporate Debtor funds. It is stated that the erstwhile Directors made GST sale until 24.02.2021 and collected GST from the customers an amount of Rs.4,38,411.62, in spite of the fact that its GSTIN was cancelled by the GST Department. As per the audited financials for the year ending 31.03.2020, the stock available was for a value of Rs. 6,60,96,425/-, however, as per the report of the external valuer appointed by the RP, the stock available with the Corporate Debtor was Rs. 31,85,100/-. It is stated that the difference between the book quantity and the valuer quantity is not available with the Corporate Debtor which is 7461 MT valued at Rs. 2,98,45,000/-. It is thus apparent that the stock was sold to the third parties and the collections were routed to the personal accounts of the Suspended Directors. It is stated that R1 to R3 while in active management of the Company indulged in enriching themselves through various third party transactions and routed the money to their personal funds and all these transactions squarely fall under Section

# 5. In reply to the application, it is stated that the Applicant has chosen to question the normal day to day transactions of the Company to portray as if there had been some underlying conspiracy in the routine decisions taken by the Board of Directors at that time on the basis of existing exigencies and on the advice given by the experts engaged by the Company. All the allegations have been replied in the clarifications letters dated 21.12.2021 and 28.12.2021.It is stated that entire records relating to the Company are in the control and in possession of the Applicant. The application has no basis. It is stated that the Respondents functioned as Directors of the Company in their real earnest and took the decisions in the interest of the Company. 

# 6. It is stated that every act of the Respondents was governed by prudence. The Respondents had assured that there was full transparency in their dealings. It is stated that the Respondents had taken the decisions that they genuinely felt were in the interest of the Company at that point of time based on the sound professional advice. The allegations are purely speculative and presumptuous.

# 7. A seizure mahazar has also been filed by the Suspended Directors vide Sr. No. 219 dated 13.01.2023 enclosing the clarifications submitted to the audit report which is reproduced as under.

# 8. It is stated that the Directors remunerations taken from the Company all along 15 years were minimal. They whole heartedly worked for the upliftment of the project, personally invested their entire resources more than Rs. 10.0 Crores in the project hoping for a bright future. The Executive Director of the Company Mr. Salaisivaprakasam is M.S., having lucrative job receiving Rs. 18 Lakhs in UK, came to India to develop the project on their request. They had no mal-intentions or motivations. It is stated that insurance claim on the project assets is yet to be settled and the Directors have been fighting to recover the value of the assets by paying the Arbitrator fee etc., of Rs. 45 Lakhs even though the Bank stopped funding. They also submitted the clarifications which are reproduced as under.

# 9. We have heard Ld. Counsels for the parties. 

# 10. Ld. Counsel for the Applicant / Liquidator argued on the lines of the application. Ld. Counsel submits that the Suspended Directors failed to provide a credible response to the allegations made against them, except bald enials. Ld. Counsel submits that the transactions as stated in the application  resulted in personal enrichment of the Suspended Directors. Ld. Counsel submits that the application has been filed based on the transaction audit eport where it was observed that the transactions were made by writing off  the advances by R1 to R3 for their personal gains and the Companies in respect of which the advances were written off are one way or the other related to the Suspended Directors. Ld. Counsel submits that the advances of Rs. 37,75,883.19 was given to SBEL Power Consultancy India Private Limited which is a related party in which R2 and R3 are the Directors which transaction was unwarranted. Instead of recovering the moneys advanced, the same was written off. Similarly, Suspended Directors transacted with Subhashri Organics India Pvt Ltd. which is a related party in which one of the Directors namely Ms. Salai Sivamalar is related. The Suspended Directors entered into sham transactions until 03.12.2018, though the Company had been struck off as early on 10.07.2017. An amount of Rs. 21,35,581/- is due from the above Company.

# 11. Ld. Counsel submits that the Suspended Management removed the stocks from the Company premises even though its financial position was poor. As per the audited financials for the year ending 31.03.2020, the stock  was shown as Rs. 6,60,96,425/- but the report of the external valuer shows the stock as Rs. 31,85,100/-. The difference between the book quantity and the value of quantity is not available with the Company which is 7461 MT valued at Rs. 2,98,45,000/-. It shows that the stock was sold to third parties and the collection was routed to the personal accounts of the Suspended Directors. They had written off advances to an extent of Rs. 13,25,050/- to Mark IV Animation Studio Pvt. Ltd. without any reason though the Company was already in stress. Further the transactions are not supported by bills. Ld. Counsel submits that the Suspended Directors wrote off a sum of Rs. 23,74,830/- given to Subhashri Export Division, which was an export division of the Company and these transactions are not supported by any documentary evidence nor the business of export division is connected with the core business of the Company. Ld. Counsel submits that a sum of Rs. 8,39,983/- was given to Alligator Automations during 2013-14 which was written off on 01.07.2017 without any reasons. Ld. Counsel submits that the Suspended Management granted advances to an extent of Rs. 29,76,172/- to various suppliers as tabulated below. . . . . . . . . .However, on 01.07.2017, the sum was written off without any reason.

# 12. Ld. Counsel submits that huge amounts were written off despite the fact that the Corporate Debtor was in deep financial stress. This clearly shows that these accounts were used to siphon off the money attracting Section 66 of IBC. Ld. Counsel submits that third party assets were created from the Company’s funds. One vehicle was purchased in the name of Mr. Kumaravel, but the amount was paid by the Company.

# 13. Ld. Counsel submits that the erstwhile Directors made GST sale until 24.02.2021 and collected GST from the customers to the tune of Rs. 4,38,411.62 in spite of the fact that GST was cancelled by the GST Department. 

# 14. Ld. Counsel submits that a sum of Rs. 164,66,66,385/- of the secured creditors stand in the name of the Corporate Debtor. Ld. Counsel submits that the Directors did not act in the interest of the Company rather got involved in the fraudulent transactions falling under Section 66 of IBC.

# 15. Ld. Counsel for the Respondents argued on the lines of the reply and seizure mahazar filed by the Respondents giving clarifications to the audit report.

# 16. We have given our thoughtful consideration to the rival contentions, gone through the written submissions, pleadings and the documents.

# 17. Before proceeding to decide the issue, the relevant provision of law under which the application has been made needs to be addressed. Section 66 of IBC, 2016, reads thus

• Fraudulent trading or wrongful trading. –

• (1) If during the corporate insolvency resolution process or a liquidation process, it is found that any business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose, the Adjudicating Authority may on the application of the resolution professional pass an order that any persons who were knowingly parties to the carrying on of the business in such manner shall be liable to make such contributions to the assets of the corporate debtor as it may deem fit. 

• (2) On an application made by a resolution professional during the corporate insolvency resolution process, the Adjudicating Authority may by an order direct that a director or partner of the corporate debtor, as the case may be, shall be liable to make such contribution to the assets of the corporate debtor as it may deem fit, if-

• (a) before the insolvency commencement date, such director or partner knew or ought to have known that the there was no reasonable prospect of avoiding the commencement of a corporate insolvency resolution process in respect of such corporate debtor; and

• (b) such director or partner did not exercise due diligence in minimising the potential loss to the creditors of the corporate debtor.

• (3) Notwithstanding anything contained in this section, no application shall be filed by a resolution professional under subsection (2), in respect of such default against which initiation of corporate insolvency resolution process is suspended as per section 10A.

18. A careful perusal of Section 66 of IBC, 2016 would manifest the fact that it deals with two transaction; Section 66(1) of IBC, 2016 deals with ‘Fraudulent Trading’ and Section 66(2) of IBC, 2016 deals with ‘Wrongful Trading’. Section 66(1) of IBC, 2016 imposes liability on ‘any person’ who were knowingly parties to the carrying on the business with a dishonest intention to defraud the creditors, to make contribution to the assets of the Corporate Debtor.

Thus, essentially for a transaction to qualify under Section 66(1) of IBC, 2016, the following conditions should be satisfied;

• (a) Liability can be fixed upon ‘any person’;

• (b) The said person should knowingly carry on the business with the Corporate Debtor;

• (c) The said person should have a dishonest intention to defraud the creditors;

# 19. Section 66(1) of IBC, 2016 is parimateria to the provisions of Section 213 of UK Insolvency Act, 1986, which is extracted hereunder;

• 213 Fraudulent trading.

• (1) If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect.

• (2) The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above-mentioned are to be liable to make such contributions (if any) to the company’s assets as the court thinks proper.

# 20. By keeping in mind the scope of sub – section (1) of Section 66 of IBC, 2016, this Tribunal is required to examine as to whether the transactions as alleged by the Applicant in the present Application against the Respondents would fall within the confine of ‘Fraudulent Trading’ that is to say that whether the business of the corporate debtor has been carried on with intent to defraud creditors of the corporate debtor or for any fraudulent purpose. In this context, it is significant to refer to the decision of the Supreme Court in the case of Anuj Jain IRP for JaypeeInrfatech Limited –Vs- Axis Bank Limited Etc., in Civil Appeal No. 8512 – 8527 of 2019; where it was held that:

• Specific material fact in relation to the transaction which is sought to be challenged by the Resolution Professional / Liquidator is required to be pleaded in the Application. 

As to the present case, the Applicant sought to reverse the transactions purported to be done by the Respondents under Section 66(1) of IBC, 2016. Writing off advances of Rs. 37,75,883.19 given to M/s. SBEL Power Consultancy India Pvt Ltd, a related party in which R2 and R3 are the Directors.

# 21. It is alleged that the Suspended Directors had written off the advances given to SBEL Power Consultancy India Pvt. Ltd., a related party in which R2 and R3 are the Directors to an extent of Rs. 37,75,883.19.

# 22. It is seen from the reply given by the Promoter Directors to the Transaction Auditor that on the suggestions of Ministry on Non-Conventional Energy Sources which had supported the project by sanctioning a capital subsidy of Rs. 6.0 Crores, the planning, engineering, construction works of the Corporate Debtor were entrusted to the SBEL Power Consultancy India Pvt Ltd having the required technical persons to engineer and execute the project. An agreement dated 09.01.2004 was entered into between the two companies where it was agreed that the Corporate Debtor would pay the cost of materials, equipments and labours, rentals of equipments, tools and construction equipments, cost incurred on engineering, drafting etc., on the project with administrative charge of 4% on the total cost. The construction and setting up plant was done by SBEL Power Consultancy India Pvt Ltd. This fact was known and accepted by the Ministry, Monitoring Committee of the project constituted by MNRE, Delhi. The amount was given rior to 2006 which was also known to the Bank. SBEL Power Consultancy India Pvt Ltd successfully completed the work and commenced the commercial production of green power in 2006. Even the Service Tax and TDS Department exempted the tax to the service provided for the same which was in the knowledge of the Bank.

# 23. Having considered the above explanation, we are of the view that the transaction was made with bonafide intentions way back in 2004 – 2006 in terms of the agreement. SBEL Power Consultancy India Pvt Ltd was a dependent Company on the Corporate Debtor which did not have subsequent business. Due to sudden change in law, the Company was struck off by the RoC. While finalizing the balance sheet, the Auditor closed the entry since there could not be any receivables towards a strike off Company. To have a true and fair view, the entry was suggested to pass in the books.

# 24. That being the position, there is no question of written off. Rather the payments were made for the works carried out by SBEL Power Consultancy India Pvt Ltd and the same cannot be said to be the fraudulent transactions.

TRANSACTIONS WITH SUBHASHRI ORGANICS INDIA PVT LTD FOR RS. 21.35 LAKHS.

# 25. The explanation given by the Suspended Directors to the Transaction Auditor reveals that the R&D project of SBEL was in the process of generating green power from bio degradable waste. It produced new by-products like fermented organic manure for agriculture as soil and 100% water soluble organic fertilizer in liquid form named as GOLF (Green Organic Liquid  Fertilizer) w.e.f. 2006. For marketing of liquid manure, Subhashri Organics India Pvt Ltd (SOIL) took the marketing of GOLF by conducting awareness campaign in Tamil Nadu and Karnataka. SBEL supplied the trial samples to SOIL, however, Tamil Nadu Pollution Control Board treated this by-product as an affluent. At that time, because of policy issues, SOIL supplied the liquid to farmers on credit basis but it could not collect the dues from the Debtors in time and could not continue the marketing. Had SOIL continued supplying GOLF to the farmers which the Government also recognized, the payments would have been collected from the GOLF Debtors but since the amount remained outstanding for more than five years, the Company opted to write off the sale.

# 26. We are of the opinion that the Respondents have given a plausible explanation for the said written off. The transactions appeared to have been done with bonafide intentions. The SOIL was the sole distributor of the liquid manure which was considered by the Government as an affluent but later notified as fermented organic liquid manure. Further, it is explained that due to sudden change in law, the Company was struck off by the RoC. While finalizing the balance sheet, the Auditor closed the entry since there could not be any receivables towards a strike off Company. To have a true and fair view, the entry was suggested to pass in the books.

# 27. That being the position, we do not find any dishonest intention on the part of the Suspended Directors to rate the said transactions to be a fraudulent or wrongful transactions.

TRANSACTION WITH MARK IV ANIMATION STUDIOS PVT LTD FOR RS. 13.25 LAKHS.

# 28. It is seen from the explanation given by the Suspended Directors that during the period from 2005-2009, SBEL paid the said amount to Mark IV Animation Studios Pvt Ltd for making process animation videos and advertisement materials to promote the marketing of the innovative products produced by SBEL. The Company also received videos and advertisement materials. It is stated that M/s. Mark IV Animation Studios Pvt Ltd did not provide the bills but they have the animation video clipping towards which the payments were made. It is stated that the payments were made by cheques. It is stated that in the absence of bills, the advances made could not be booked and claimed as advertisement expenses, but there is no question of an advance becoming bad. It was a genuine business expenditure which was inadvertently not booked in the books of accounts under the head of

expenditure.

# 29. Looking into the explanation and the video clippings attached, we find that the above payments were made to Mark IV Animation Studios Pvt Ltd to promote marketing of SBEL and the products of SBEL. It was transaction made in the usual course of business and cannot be said to be a fraudulent transaction in any manner as alleged.

TRANSACTION WITH SUBHASHRI EXPORT DIVISION FOR RS. 23.75 LAKHS

# 30. In the explanation given to the Transaction Auditor, it has been stated that during 2003-06, SBEL exported farm fresh poultry eggs to M/s. Friendship International Trading & Contracting Company, Kuwait with the knowledge of the Bank. The copy of export invoice also enclosed. It is stated that the eggs were purchased from the local market and the consignment was made for a value of Rs. 23,74,830/-. During the year under review, the epidemic “Bird Flu” spread in many parts of India. Many countries were reluctant to import eggs from India. The Company could not get reasonable price for the eggs which resulted into trade loss of Rs. 5,05,501/- which is also reflected in the audited balance sheet as on 31.03.2006. The Company could not recover the entire sale proceeds from the Company at Kuwait despite prolonged correspondence, copy of which was also given to the Auditor. The Company also approached the Export Credit Guarantee Corporation Ltd for claiming the export proceeds but it did not materialize. After a long wait, the Company took a decision to write off the amount on 31.03.2018.

# 31. Having considered the correspondence and the records, we find the above transactions were the genuine transactions. The Company had taken up the matter with ECGC for claiming the export proceeds but could not get success and after a long wait of about 12 years, it wrote off the amount on 31.03.2018. It is not the case that the Company did not make efforts to recover the amount. That being the position, the said transaction would not come within the ambit of fraudulent transaction.

TRANSACTION WITH ALLIGATOR AUTOMATIONS FOR RS. 8.39 LAKHS

# 32. As seen from the explanation, the said amount was paid on 25.11.2013, 03.11.2014 and 16.12.2014 from SBEL cash credit account as advance to M/s. Alligator Automations for supplying, erecting and commissioning of automatic packing machine against P.O. dated 22.11.2013. The Alligator Automations supplied the machine and did the erection but the problems started while putting the machine in operation. The Directors have given the copy of the invoices and C Form. It has been claimed that the packing machine has been still lying in the section. There is also correspondence showing that M/s. Alligator Automations was again asked to commission the machine vide mail dated 04.02.2021 but the same could not be commissioned. 

# 33. In the instant case, there is no document indicating that M/s. Alligator Automations is related to the Respondents or any undue benefit was given to M/s. Alligator Automations. It was a genuine transaction made by the Corporate Debtor, however it did not give the desired result. In these circumstances, the said transaction cannot be said to be fraudulent transaction as alleged.

PAYMENT OF RS. 4.6 LAKHS PAID TO M/S. PENNWALT LIMITED (PWL), MUMBAI AS ADVANCE.

# 34. It is explained in reply to the Transaction Audit report that the said sum was given as an advance for supplying Decanter Machines in 2008-09. PWL supplied a smaller version of Decanter on a trial basis with a promise that the smaller version will be replaced and the advance will be adjusted. In the meantime, the Bank froze the account of the Company which became NPA. This delayed the payment by the Company to PWL for a new machine. There was a hike in the price of the Decanter. PWL did not adjust the advance. The dispute arose. In 2016, the production came to standstill because of labour unrest. It is stated that the Company could not recover the amount from PWL and the same was treated as a bad debt and written off.

# 35. Having considered the explanation and the documents, we find that PWL is not a related party of the Corporate Debtor, the transaction was made in the usual course of business. The Corporate Debtor could not make the timely payment to PWL for purchase of Decanter. In the meantime, the price escalated. In 2016, the production came to standstill. It was only after a period of 8 years, since there was no possibility of recovery of advance from

PWL, the said amount was treated as bad debt and was written off. We are of the view that the Suspended Director have sufficiently explained the transactions and the same cannot be said to be made with an intention to siphon of the money to the disadvantage of the Creditors. 

Advance paid to Shahithya Engineering Enterprises for Rs. 2.28 Lakhs for purchase of maintenance spares for Decanter machines.

Advance paid to Paroksha Design House for Rs. 1.0 Lakhs for supply of Staff Uniform.

Advance of Rs. 14 Lakhs paid to M/s. S. Natarajan, major poulty litter supplier.

Advance of Rs. 4.06 Lakhs paid to M/s. M.S. Company Account, supply of fabricated gas scrubber components and associated machineries.

Advance of Rs. 3.8 Lahks paid to M/s. Everest Tent Technologies, supplier of double membrane balloon, design and stitching.

# 36. As seen from the explanation, the above parties were the vendors of the Corporate Debtor which were engaged in the normal course of business by the Company. It is stated that the items supplied by the vendors are still in the premises and were not put to any personal use. All the payments were made by cheques. In the absence of bills over a prolonged period, the amounts could not be booked and claimed as machinery maintenance. It is also stated that the Poultry Farm was subsequently closed in 2012-13 due to loss. While finalizing the balance sheet, the Statutory Auditor closed the entry as there could be no receivable towards the strike off Company and to have a true and fair view, the entry was suggested to pass in the books in respect of transaction with M/s. S. Natarajan. In respect of M/s. M.S. Company, it is stated that the machine was not as per the specifications of SBEL. The dispute continued for a decade. The SBEL could not recover the advance nor got the machinery and later the advance was written off. It is stated that M/s. Everest Tent Technologies was the supplier of double membrane balloon design. It stitched the same against which payments were made. It is stated that there is no question of any advance going bad but it was a genuine business expenditure inadvertently not booked in the books of accounts under the correct head of expenditure.

# 37. Looking into the explanations, we find that these transactions were made in the usual course of business without any dishonest intention to siphon off the money.

TRANSACTION WITH PAROKSHA DESIGN HOUSE FOR RS. 1.01 LAKHS

# 38. It is explained by the Respondents that Paroksha Design House had supplied uniform for the staffs in the Company. The advances were given for the same. It was a vendor of the Company. The items supplied by the Vendors are still in the premises and not been put to any personal use.

# 39. Considering the explanation, the said transactions cannot be said to be fraudulent transactions.

TRANSACTION WITH C. KUMARAVEL FOR RS. 21.71 LAKHS.

# 40. It is explained by the Suspended Directors that Mr. C. Kumaravel was a transport agent. He had entered into a MoU with the Company for utilizing the vehicles by SBEL. He has been paying the EMIs to the Financiers. The vehicles TN 28 AT 0335 and TN 34 E 3355 belonged to Mr. C. Kumaravel and were used by the Company for transporting manure to the Farmers. The vehicles were not purchased by the Company as can be seen from the document. It is stated that Mr. C. Kumaravel was also a job work agent and had a powder plant in the land adjacent to SBEL. An MoU was entered between them by which Mr. C. Kumaravel would convert organic liquid produced by the Company into 100% water soluble organic fertilizer in powder form and return the same to the Company and for this job work, the Company would make the payment. It is stated that in that process an advance of Rs. 11,15,030/- was given to Mr. C. Kumaravel during the period 2015-16, but the powder plant could not start the production till 2016 since the  Company could not supply the raw materials. The production activities of the Company came to standstill in the year 2016.

# 41. Considering these facts, we are of the view that the said transactions were the genuine transactions made in the usual course of business for the Company and the same cannot be said to be fraudulent transactions in any manner. GST sale until 24.02.2021 and collection of GST of Rs.4,38,411.62 from the customers in spite of GSTIN cancelled suo-moto by the GST Department.

# 42. Although the record shows that GSTIN: 33AAHCS5283P1ZQ of the Corporate Debtor was cancelled suo-moto by the GST Department, but the Suspended Directors made the GST sale till 24.02.2021 and collected the GST from the customers in violation of Section 122 – Section 128 of the CGST Act, but the said sale at the best can be in violation of the CGST Act and in no way be said to be fraudulent transactions to bring the same within the ambit of Section 66 of IBC. It is for the GST Authorities to take action against the management or the Suspended Directors for the violation. It is not the case that from these transactions, the Suspended Directors / Respondents have drawn any benefit or they used the said amount for their personal use. The violation of GST Act does not amount to fraudulent transactions with an intention to defraud the Creditors. GST collection has been shown in the ledger of the Corporate Debtor and nothing was concealed by the Suspended Directors qua the above transactions.

DISCREPANCY IN THE STOCKS IN HAND

# 43. In the transaction audit report, it was pointed out that as per the audited financials for the year ending 31.03.2020, the total stock available with the Corporate Debtor was of the value of Rs. 6,60,96,425/-. As per the provisional financials prepared by the RP based on the available information, the stock value with the Corporate Debtor was Rs. 6,24,04,560/- but as per the report of external Valuer appointed by the RP, the value of the stock available with the Company is Rs. 31,85,100/- comprising of 3539 MT of the stock at Rs. 900 per MT. It is stated that the Valuer has not considered the liquid stock and the packing materials for valuations.

# 44. In the report it is stated that the finished goods available with the Corporate Debtor as per the audited financials as on 31.03.2020 comprised of 11,000 MTs amounting to Rs. 550.00 Lakhs, but as per the external Valuer the stock available with the Company was only 3539 MTs for an amount of Rs. 176.95 Lakhs.

# 45. The Suspended Directors in their reply have stated that in the report stock value was left blank and they were not made aware of the valuation. On 22.12.2021, they had requested the Auditors to provide the stock valuation details as assessed by the RP so that they could reason out the differences if any, but till date they did not receive the same.

# 46. Though in the report it is stated that there was a weight loss due to evaporation and moisture but there is no document to show how much would be the weight loss due to evaporation and moisture. Further, as per the audited financials, the stock available with the Corporate Debtor was of Rs. 6,60,96,425/- as on 31.03.2020. The CIRP in the present case was initiated on 02.09.2021. The external Valuer was appointed after the CIRP. There is nothing on record to indicate that the Valuer at the time of assessment / physical verification had given notice to the Suspended Directors. He made his own assessment at site and submitted the report. Since in the present case, as seen from the reply, the Suspended Directors were not provided the stock valuation details or the opportunity to reason out the differences, no inference can be drawn that the Suspended Directors misappropriated the stocks or drew any benefit out of the same.

# 47. Considering the above fact, we are of the opinion that the said transactions cannot be said to be the fraudulent transactions.

# 48. It is also relevant to note the explanation given by the SuspendedDirectors which is as under:

49. Having considered the facts in totality in the given circumstances and the explanation given by the Respondents, which are supported by documents, we are of the view that the findings of the Transactions Auditor do not per se fall under Section 66 of IBC, 2016. In fact, the Respondents have given a detailed and satisfactory explanation to the observations / findings made by the Transaction Auditor. The RP has filed the Application under Section 66 of IBC, 2016 fastening liability upon the Respondents, however without fulfilling the essential ingredients required under Section 66 of IBC, 2016 to maintain the present Application. The RP has made the bald assertions to show that the business of the Corporate Debtor was carried out by the Respondents with a dishonest intention and to defraud the creditors.

# 50. It is apt to refer that as per explanation to section 66 of the IBC, the NCLT is mandated to presume that all directors and partners of the corporate debtor have exercised necessary care and proper due diligence in conducting the affairs of the corporate debtor and the burden of proof is on the liquidator or the resolution professional, as the case may be, to show that the conduct of the partner or director, was not reasonable and was not in exercise of appropriate due diligence. Where, the resolution professional or the liquidator is unable to establish the same, then, in such circumstances, the statutory presumption as set out in the Explanation, operates in favour of the partner or  director and the application under section 66 of the IBC, against such persons ought to be dismissed, on account of such statutory presumption. Setting out this position in law, the NCLAT in Regen Powertech Pvt Ltd v Wind Construction Pvt Ltd, observed as follows:

• 33. Be it noted, this 'Tribunal', significantly, points out that, whenever 'Fraud' on a 'Creditor' is perpetrated in the course of 'carrying on Business', it does not necessarily follow that the 'Business' is being carried on with an 'Intent to Defraud' the 'Creditor'

• 34. One cannot remain 'oblivious' of the candid fact that, if the 'Directors' of a 'Company’ had acted on a 'bonafide belief’ that the Company would 'recover’ from its ‘Financial Problems’ / ‘Difficulties’, then, they will not be held liable for the ‘act’ / ‘offence’ of ‘Fraudulent Trading’.

• 35. As a matter of fact, the 'aspect' of 'Fraudulent Trading' requires a very ‘High Degree of proof’, which is attached to the 'Fraudulent Intent’. To put it emphatically, a more compelling "Material' / 'Evidence' is required to satisfy the conscience of this ‘Tribunal', 'on a preponderance of probability’. Apart from that, an 'isolated' / 'solo fraud’ case, against the person, then, action in ‘tort’ can be resorted to, as opined by this ‘Tribunal’. No wonder, a 'Creditor', who was defrauded, will have 'recourse' to an 'alternative remedy’, under 'Civil Law'.

• 36. Barring the aforesaid 'Reliefs' / 'Directions' being sought for, in the instant case, there are no 'Convincing Tangible' / 'Documentary Materials' to fortify the 'Plea' of the 'Applicant' that the 'Business' of the 'Corporate Debtor' was carried out by the Respondents with a 'Dishonest Intention' and, especially, to 'Defraud' the 'Creditors'. To put it precisely, the averments projected by the 'Applicant' do not come within the 'Four Parameters', of the ingredients of Section 66 of the Insolvency and Bankruptcy Code, 2016.

# 51. In the light of what has been stated above, we are of the view that the Applicant / RP / Liquidator has not made a case of fraud or dishonest intention on the part of the Respondents except making sweeping allegations and hence Section 66 of IBC, 2016 cannot be invoked under such circumstances. The present Application is liable to be dismissed. 

# 52. Accordingly IA/249(CHE)/2022 is dismissed with no orders as to costs.

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