Malhotra v. City of Brampton, 2023 ONSC 2291

COURT FILE NO.: 32-1758002

DATE: 2023 01 31

ONTARIO SUPERIOR COURT OF JUSTICE

IN BANKRUPTCY AND INSOLVENCY

IN THE MATTER OF THE BANKRUPTCY OF VERINDER MALHOTRA

OF THE CITY OF BRAMPTON

IN THE REGIONAL MUNCIPALITY OF PEEL

BEFORE: Associate Justice Ilchenko, Registrar in Bankruptcy

COUNSEL: Philip Gertler (“Gertler”) and Fred Tayar (“Tayar”) for the Bankrupt Verinder Malhotra (the “Bankrupt”)- Tayar is also counsel to Kiran Malhotra, wife of the Bankrupt (“Kiran”);

Ted Laan (“Laan”) for Creditor Gurdeep Nagra (“Nagra”);

Brandon Jaffe (“Jaffe”) for A. Farber and Partners Inc., the Bankruptcy Trustee of the Bankruptcy Estate of Verinder Malhotra (the “Trustee”) not appearing on this expungement Motion and Trustee not opposing the relief sought by the Bankrupt

HEARD: November 24, 2022 by Zoom Videoconference for a full day

E N D O R S E M E N T

I. Overview

[1] This motion was brought by the Bankrupt for the relief set out in his Motion Record dated February 24, 2019 (the “Expungement Motion”), requesting, inter alia:

“2 . An Order that the claim filed by Gurdeep Nagra ("Nagra") in the estate of Verinder Malhotra, a bankrupt dated July 30, 2013 originally in the amount of $5,994,500.00 (the "Nagra Claim") as accepted by A. Farber & Partners Inc., Licensed Insolvency Trustee (the "Trustee") of the estate of Verinder Malhotra, a bankrupt ("Malhotra") in the amount of

$2,580,000.00 be expunged or reduced pursuant to section 135(5) of the Bankruptcy and Insolvency Act (Canada), R.S.C. 1985, c. B-3 as amended (the "BIA" ) to $85,000.00 being the amount of the cost award Nagra obtained against Malhotra in Ontario Superior Court of Justice in Court File No. 10-CV- 413793 (the "Cost Award");

3. Further and in the alternative an Order pursuant to section 37 of the BIA to modify the decision of the Trustee in comprising and accepting the Nagra Proof of Claim in the amount

of $2,580,000.00 and to substitute therefor a decision to admit the Nagra Claim only to the extent of the Cost Award;”

[2] After much procedural wrangling, changes of counsel by Nagra, a period of self- representation by Nagra, and orders by Associate Justice Jean and Conway, J. that will be detailed in these reasons, this Motion came before me to be scheduled as a Special Appointment in Case Conferences on July 27, 2022 and September 16, 2022 and was heard for a full day by me on November 24, 2022.

The Nagra Proof of Claim

[3] The Bankrupt filed a Proposal under the Bankruptcy and Insolvency Act (the "BIA") on July 12, 2013 with (now) Scott, Pichelli and Easter Ltd. as Proposal Trustee (the “Proposal Trustee”).

[4] Nagra filed a Proof of Claim (the “Nagra Claim”) in the proposal proceedings for the Bankrupt on July 31, 2013, in the amount of $5,994,500. The Nagra Claim is Exhibit “A” to the Affidavit of the Bankrupt sworn February 13, 2019 (the “Bankrupt’s Affidavit”). I have attached the entire Nagra Claim as Schedule “A” to these Reasons.

[5] The Nagra Claim was filed with the Proposal Trustee by Kyle Plunkett at Thornton Grout Finnigan LLP, then counsel for Nagra (“TGF”). Later TGF become counsel to the Bankruptcy Estate of the Bankrupt, and then was replaced by Jaffe.

[6] The Nagra Claim encompassed a Costs Award of $85,000 arising from the Order of K.L. Campbell, J. dated July 31, 2012 (the “Canadian Jurisdiction Order”) and reasons dated July 21, 2012 (the “Campbell, J. Reasons”) determining that Ontario was a proper forum for an action by Nagra against the Bankrupt (prior to bankruptcy) pursuing the Bankrupt for an alleged debt of US$3.5 million in relation to an allegedly unpaid promissory note in the amount of US$3,500,000 dated November 19, 2007 (the “Promissory Note”) commenced in 2010 in Brampton as Action CV-10-413793 (the “Brampton Collection Action”). Other than the Campbell, J. Reasons, which did not do so, there is no evidence before me on this Motion that a judicial determination was made in the Brampton Collection Action on the validity and enforceability of the Promissory Note, prior to the Bankrupt filing a Proposal on July 3, 2013.

[7] The Nagra Claim attaches at Schedule “A” the Purchase and Sale Agreement dated November 19^th, 2007 between the Bankrupt and Nagra, where the Bankrupt purchased from Nagra the 50% stockholding or membership interest of Nagra in 11 companies in the US, where the Bankrupt already owned the other 50% (the “Share Purchase Agreement”).

[8] The Share Purchase Agreement had the following terms relevant to this Motion:

“WHEREAS, the Mr. Nagra desires to sell his interest in the Companies for fair value and Dr. Malhotra desires to hold the entire ownership interest in the Companies, and

WHEREAS, the parties have approximate fair market value of the Companies by way of reference to appraisals and other valuations of the principal assets of the Companies and subtracting the principal debt obligations of the Companies, all as shown on Exhibit A attached hereto (the "Aggregate Value"); and

WHEREAS, prior to the execution of this Agreement, Dr. Malhotra had invested the sum of One Million Nine Hundred and Seventy Five Thousand Dollars ($1,975,000.)in the Companies (the "Malhotra Contribution""): and

WHEREAS, prior to the execution of this Agreement, Mr. Nagra had invested the sum of Four Hundred Eighty Two Thousand One Hundred and Sixty Nine Dollars ($482,169) in the Companies (the "Nagra Contribution");

WHEREAS, the parties agree that the fair value of Mr. Nagra's one half interests in the Companies, in the aggregate, may be calculated by subtracting the Malhotra Contribution from the Aggregate Value, dividing the remainder in half, adding the Nagra Contribution, and finally discounting that result by twenty five percent (25%) to reflect the benefit of liquidity to Mr. Nagra and the ongoing risk to Dr. Malhotra, all as shown on Exhibit A attached hereto:

NOW, THEREFORE, in consideration of the forgoing premises and the specific exchange of benefits set forth below, the sufficiency of which the Parties hereby acknowledge, the Parties agree as follows:

1. Effective as of the date hereof, Mr. Nagra hereby assigns, transfers and conveys, all of his right, title and interest in the Companies to Dr. Malhotra, and Dr. Malhotra does hereby purchase all such right, title and interest for the purchase price of Three Million Five Hundred Thousand Dollars ($3,500,000) (the "Purchase Price""). Mr. Nagra and Mr. Malhotra specifically appoint George Nostrand, Esq. as the transfer agent of all shares and interests in each and every one of the Companies and Mr. Nagra hereby direct Mr. Nostrand to transfer all of Mr. Nagra's shares and interests in said Companies and all books and records of same to Mr. Malhotra. Mr. Nagra shall execute and deliver any and all such other documents as may be required to evidence such transfer and the transfer of his ownership interests, but each and every one of such transfers shall be deemed completed as of Mr. Nagra's execution and delivery of this Agreement.

2. As payment of the balance of the Purchase Price, Dr. Malhotra has executed and delivered to Mr. Nagra the Promissory Note attached hereto us Exhibit B.

4.[sic] In the event of default by Dr. Malhotra under the Promissory Note, Mr. Nagra agrees that his sole remedy shall be at law for damages and expressly waives any right of rescission he may have or hereafter acquire and renounces irrevocably his present and any future interest he has or may have in the Companies.

5. This Agreement and the Promissory Note constitute the entire agreement between the Parties with respect to the matters set forth herein, and it supersede any and all prior oral

or written agreements, commitments or understandings with respect to such matters. This Agreement shall be binding upon, shall enure to the benefit of and shall be enforceable only by the Parties and their respective successors, heirs, executors and administrators. Except as otherwise specified by applicable law, no other person or entity shall be deemed to have any rights under this Agreement or be entitled to bring any action to enforce any of its provisions.

6. This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of Vermont.

7. The Parties acknowledge that each has had the opportunity to have separate counsel examine it on his behalf and advise him independently of its form, meaning and effect and has either done so or hereby expressly waives any claim he may have that his interests were not adequately represented or protected in the drafting of this Agreement. Each party further acknowledges that he is sufficiently familiar with the assets and operations of the Company to enter into this Agreement knowingly and without reliance on any representation or warranty of the other.

8. This instrument may be executed in several counterparts, including by facsimile, each of which shall be deemed an original and together all forming one and the same Agreement.”

[9] The Promissory Note had the following terms:

“PROMISE TO PAY. Verinder Malhotra, M.D. (hereafter "Borrower") promises to pay to Gurdeep Nagra (hereafter "Lender"), or order, in lawful money of the United States of America the principal amount of Three Million Five Hundred Thousand Dollars ($3,500,000) together with interest at the rate of five percent (5%) per annum. Principal shall be due and payable in five equal annual installments of Seven Hundred Thousand Dollars, together with accrued interest, the first such payment due and payable on December 1, 2008 and the four succeeding payments on December 1, 2009, December 1,

2010, December 1, 2011 and December 1, 2012.

PAYMENT. Borrower will pay Lender et such address as Lender may designate in writing, including a direct deposit to an account designated by Lender. Unless otherwise agreed or required by applicable law, payments will be applied first to any unpaid interest, second to the payment of any unpaid collection costs and late charges, and then to principal.

PREPAYMENT. Borrower may prepay without penalty or premium all or any portion of the account owed earlier than it is due, but any such early payments will not relieve Borrower of its obligations to continue to make payments under the payment schedule set forth above.

LATE CHARGE. If a payment is ten (10) days or more late, Borrower shall be obligated to make an additional payment equal to one percent (1.0%) of the unpaid portion of the regularly scheduled payment.

DEFAULT. The occurrence or existence of any one of the following events or conditions shell constitute an "Event of Default" under this Note: (a) Borrower fails to make any payment when dure under this Note and such failure to make timely payment continues for fifteen (15) calendar days after the due date; (b) Borrower is in default, after the expiration of any applicable cure period, under any bank or other leader borrowing by Borrower or any entity owned or controlled by Borrower, that is secured by all or substantially all of the assets of Borrower and/or Borrower's guarantee;

LENDER'S RIGHTS. If an Event of Default shall occur, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest Immediately due, upon fifteen (15) days prior written notice to Borrower. Upon the occurrence of an Event of Default, Lender, at its option, may also, if permitted under applicable law, add any unpaid accrued interest to outstanding principal and increase the interest rate on such aggregate amount to twelve (12%) with such interest to accrue until all principal and interest are paid in full. Borrower shall also be obligated to pay. Lender's reasonable attorneys' fees expenses incurred in collecting this Note from Borrower in the Event of Default, whether or not litigation is required. Regardless of any Event of Default, Lender shall not be entitled, and waives any right, to rescission of the purchase and sale transaction in connection with which this Note is delivered,

WAIVER LIABILITY. Borrower and all other parties now or hereafter liable upon or for payment of this Note hereby severally waive demand, presentment for payment, protest, notice of any kind (including, but not limited to, notice of dishonor, notice of protest, notice of intention to accelerate and notice of acceleration), and diligence in collecting and bringing with against any of said parties. The liability of the Borrower under this Note shall be absolute, unconditional and irrevocable, irrespective of : (i) the failure of the Lender to assert any claim or Demand or to enforce any right or remedy against the Borrower under this Note; and (ii) any change in the time, manner or place of payment of all or any of the sums due and payable under this Note agreed to in writing by any maker hereof.

BINDING EFFECT. This Note shall be binding upon the parties hereto and their respective hairs, executors, administrators, successors and assigns.

SEVERABILITY. If any provisions of this Note shall be invalid, illegal or unenforceable, such provision shall be severable from the remainder of this Note and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.”

[10] As at June 12, 2013 the amounts claimed under the Nagra Claim were calculated as follows in Schedule “A” to the Nagra Claim:

Details

_.

·.· ·/ Currency

!t.,

Indebtedness

Principal Amount

CAD

$3,500,000¹

Accrued Interest: From

CAD

$175,0002

December 1, 2007 to

December 1, 2008 at 5%

Accrued Interest:

CAD

$1,984,5003

December 1, 2008 to June

1, 2013 at 12%

Legal Fees & Collection Costs as at June 12, 2013

CAD

$250,000

Awarded Costs by Court

CAD

$85,000

TOTAL:

CAD

$5,994,500

1 Pursuant to the terms of a Purchase and Sale Agreement dated November 19, 2007 entered into between Gurdeep Nagra and Verinder Malhotra.

2 Pursuant to the terms of a Promissory Note dated November 19, 2007, interest accrues at a rate of5% per annum.

3 Pursuant to the terms of a Promissory Note dated November 19, 2007, interest accrues at a rate of 12% per annum upon the occurrence of an Event of Default (as defined in the Promissory Note).

[11] The Bankrupt does not contest the $85,000 costs award. The Bankrupt hotly contests that he owes Nagra the full US $3.5 million face value of the Promissory Note, interest on the Promissory Note as calculated in the Schedule A to the Nagra Claim, and $250,000 in purported “Legal Fees and Collection Costs”.

The Brampton Collection Action

[12] Nagra commenced the Brampton Collection Action in 2010. I have not been able to locate the Statement of Claim for that Action in the Materials properly before the Court on this Motion.

[13] K.L. Campbell, J. in the Campbell, J. Reasons on the Jurisdiction Motion, summarized the facts of the Action as follows:

“[1] The plaintiff, Gurdeep Nagra, has commenced an action against the defendant, Verinder Malhotra, claiming that the defendant owes him US$3.5 million in relation to an unpaid promissory note. The plaintiff wants the action tried in Toronto.

[2] The parties were originally partners in relation to the purchase and development of lands for the operation of various hotels in Vermont and New Hampshire in the United States. More particularly, the parties were equal shareholders in some ten different American companies which owned the properties and operated the hotels. Both parties personally guaranteed the various mortgages and other debts associated with these ventures.

3. Sometime in 2007, the defendant became interested in buying-out the plaintiff's share of the companies. Eventually, on November 19, 2007, after negotiations between the parties had concluded, the parties entered into a Purchase and Sale Agreement, wherein the plaintiff sold his 50 per cent interest in these companies to the defendant for $3.5 million. The plaintiff transferred the entirety of his interest in the companies to the defendant. In turn, the defendant gave the plaintiff a promissory note, also dated November 19, 2007, in the amount of $3.5 million. The terms of this promissory note required the defendant to pay 5 per cent interest (when not in default), and pay the debt in five equal annual installments of

$700,000 plus the accrued interest. The final payment was to be made on December 1, 2012.

4. While the defendant has now liquidated all of his interest in these companies, the promissory note to the plaintiff remains wholly unpaid. The defendant has made none of the prescribed annual installments. With this action, the plaintiff seeks to recover this debt from the defendant.

5. By way of defence, the defendant claims that the plaintiff failed to disclose, prior to completing the Purchase and Sale Agreement, the existence of numerous loans, liens and other payables against the corporations. These debts allegedly totalled some $7.1 million. Indeed, the defendant contends that these debts were [deliberately] concealed from him by the plaintiff. Further, the defendant claims that, after he discovered this "material non-disclosure" of these "financial irregularities" in [page449] the companies, the parties agreed that payment to the plaintiff would only be made from the proceeds, if any, of the sale of two particular real estate properties.”

[14] Central to the Defence by Nagra of this Motion are the specific defences raised by the Bankrupt in the Statement of Defence to the Brampton Collection Action dated January 13, 2011 (the “Bankrupt’s Statement of Defence”) and the subject matter of many of the questions asked of the Bankrupt by Laan in the cross-examinations conducted for this Motion.

[15] The Bankrupt’s Statement of Defence is attached to the Bankrupt’s Affidavit at Exhibit “C” and filed as Tab 1 of the Compendium filed by Nagra. The Statement of Defence was filed by the counsel for the Bankrupt at the time, Howard Reininger (“Reininger”) .

[16] That Exhibit “C” is a letter dated March 22, 2016 from Gertler to the Trustee, that questions the admission of the Nagra Claim and attaches the Bankrupt’s Statement of Defence, the Affidavit of George W. Nostrand (“Nostrand”) the former Vermont lawyer for the Bankrupt dated January 24, 2013 (the “Nostrand Affidavit”) and an excerpt of a Mediation Brief filed on behalf of the Bankrupt by Teplitsky Colson, who replaced Reininger as counsel for the Bankrupt for a Mediation in the Brampton Collection Action that apparently took place on January 31, 2013 (the “Mediation Brief Excerpt”).

[17] The relevant paragraphs of the Bankrupt’s Statement of Defence read:

“1. The Defendant denies each and every allegation in the Statement of Claim except as hereinafter admitted.

2, The Defendant is a permanent resident of the United States of America and has been a resident in the United States since February 21, 2005.

3. The Plaintiff and the Defendant entered into an Agreement on November 19, 2007 for the Defendant to purchase from the Plaintiff 50% interest in ten different corporations incorporated and operating in the States of Vermont and New Hampshire in the United States of America.

4. The purchase price was to he $3.5 million in US funds to be paid by way of a Promissory Note.

5. The Agreement of Purchase and Sale specifically provided that it would be governed by and interpreted in accordance with the internal laws of the State of Vermont.

6. The Defendant pleads and the fact is that the Promissory Note delivered by the Defendant to the Plaintiff pursuant to the Agreement of Purchase and Sale is also to be governed by and interpreted in accordance with the laws of the State of Vermont.

7. The Plaintiff had failed to disclose to the Defendant that he had encumbered the assets of the corporations whose shares were being purchased by the Defendant which encumbrances were only disclosed and registered against the subject corporations after the sale to the Defendant.

8. In addition, the Plaintiff had orchestrated the removal of certain encumbrances against the assets of the subject corporations prior to the sale only to be refiled after the sale to the Defendant.

9. In addition, there were numerous undisclosed debts of the corporations which information was not provided to the Defendant.

10. In total there is approximately $7,132,781.85 in undischarged loans, liens and payables against the corporations where shares were purchased of which the Defendant was unaware and which the Plaintiff deliberately concealed from the Defendant.

11. As a result of the defendant discovering the material non-disclosure of financial irregularities, the Plaintiff and Defendant negotiated un amendment to the Agreement of Purchase and Sale aforesaid confirmed in writing by the Defendant on November 24, 2007 which provided that payment to the Plaintiff would only be made from the proceeds arising out of the sale of two real estate properties known as the Keene Project and the Killington Project.

12. The Plaintiff knows and is aware that the Promissory Note is no longer in force or effect.

13. On January 11, 2010, an action was commenced against the Defendant with respect to financing obtained for the subject corporations which the Defendant has not been able to pay because of the actions of the Plaintiff.

14. On the 17" of November, 2010, the Defendant issued a Third Party Claim against the Defendant [sic] in the proceedings in the State of Vermont for contribution and indemnity against the Plaintiff regarding his concealment of material information from the Defendant relating to the Agreement of Purchase and Sale aforesaid,

15. Another action was also commenced in January 2010 against the Defendant in the State of New Hampshire relating to financing which the Defendant could not pay as a result of the Plaintiff's actions.

16. The proceedings in the State of New Hampshire were sought to be expanded to include the Plaintiff as a Defendant on a motion in February 2010 brought by the Plaintiff in the action in the State of New Hampshire.

17. The facts and issues to he dealt with in the actions in Vermont and New Hampshire will be the same facts and issues that will have to be dealt with in this action.

18. This action should be stayed pending the disposition and outcome of the actions in Vermont and New Hampshire.

19. In the alternative, the Defendant is entitled to setoff against the Plaintiff with amounts claimed as a result of the material non-disclosure of information by the Plaintiff to the Defendant as a result of which there is no money due and owing to the Plaintiff.

20. The Defendant submits that this action be dismissed with costs on a substantial indemnity basis.”

The Proposal and Bankruptcy of the Bankrupt

[18] Malhotra’s Proposal to his creditors was not accepted and he made a deemed assignment into bankruptcy on August 2, 2013 when the Creditors, including Nagra, voted down the Proposal.

[19] In a deposition taken in a Negligence Action brought by the Trustee against Nostrand in Vermont (the “Vermont Negligence Claim”) for allegedly failing to monument the “Governing Agreement” central to this Motion, which will be dealt with in detail subsequently in these Reasons, Martin Cyr was deposed on behalf of the Trustee on October 30, 2017 (the “Cyr Deposition”). The Transcript of the Deposition is at Exhibit “D” to the Bankrupt’s Affidavit.

[20] From the transcript of the Cyr Deposition it appears that TGF, who filed the Nagra Proof of Claim as counsel for Nagra, after the deemed assignment into Bankruptcy, resigned as Nagra’s

lawyer and was appointed as counsel to the Trustee. Cyr also confirms that the Proposal Trustee was substituted by the Trustee on the First Meeting of Creditors on the Motion of Nagra.

[21] Nagra became one of two inspectors in his estate. The other inspector is a representative of the CRA. Nagra apparently voted against the Proposal.

[22] According to the Claims Register at Exhibit “H” to the Bankrupt’s Affidavit as at November 2, 2018 there were 10 secured creditors of the Bankrupt with claims filed totaling

$964,315.46, although none were admitted.

[23] In addition, there were 26 unsecured claims declared by the Bankrupt, totalling

$4,298,430.00, of which 13 creditors filed claims totalling $8,522,852.15, with the largest being the Nagra Claim in the amount of $5,994,500.00.

[24] The Trustee has currently admitted 12 unsecured claims totaling $4,395,042.82, including the Nagra Claim at the reduced amount of $2,580,000.00. The next largest claim was the unsecured claim of CRA in the amount of $1,361,924.71. In addition CRA made a $23,267.58 Deemed Trust claim.

[25] In correspondence attached to the Claims Register from Jaffe to Gertler dated December 12, 2018 at Exhibit “H” to the Bankrupt’s Affidavit (the “Jaffe Letter”), the replacement counsel for TGF as counsel to the Trustee, Jaffe states, that after considering the factors set out in the letter, and after reviewing the documents provided by Gertler, that:

“The Trustee reviewed the documents attached to your March 22, 2016 letter. On December 2, 2016, our office wrote Mr. Nagra and advised him that the Trustee had marked his claim as contingent to investigate the matters addressed in your March 2016 letter to the Trustee. The Trustee has conducted significant investigation into the allegations you raise and reached the conclusion, with the benefit of instructions from Mr. Rene Tegelaar, the sole non conflicted inspector, that it was in the best interest of the estate to attempt to compromise the Nagra Proof of Claim rather than litigate a disallowance.

The Trustee has compromised and accepted the Nagra Proof of Claim in the amount filed of $2,580,000.00. This compromise was approved by the sole non conflicted estate inspector.”

[26] In part, the apparent reasoning of the Trustee in compromising rather than litigating the Nagra Claim, as set out in some detail in the Jaffe Letter, was the expense of the litigation of the Nagra Claim could exceed the funds remaining in the estate of approximately $227,000.00 as of that date, and could leave the Trustee personally liable to any costs awards made in the litigation with Nagra.

[27] It is unclear whether prior to December 2, 2016 the Nagra Claim had been deemed contingent by the Proposal Trustee in the Proposal Proceedings, or valued as a contingent claim and approved for voting at either the First Meeting of Creditors in the Proposal or objected to.

[28] If the contingent status was present prior to December 2, 2016 that could have prevented Nagra from voting at the meeting of creditors in the Proposal or the Bankruptcy and could have prevented Nagra from being appointed as an Inspector of the Bankruptcy Estate.

[29] The Nagra Claim clearly was contingent after December 2, 2016 based on the correspondence above from Jaffe, and remained contingent for an unknown period until December 12, 2018 when Jaffe advised Gertler that the Trustee had compromised the Nagra Claim and admitted it at the lower amount of $2,580,000.00. It is unclear to me on this Motion as to how that amount was arrived at.

[30] In part, this delay between 2016 and 2018 by the Trustee in determining whether to admit the now-contingent Nagra claim involved the determination of the claim by the Bankruptcy Estate against Nostrand in the Vermont Negligence Action for allegedly not properly monumenting the “Governing Agreement” at issue in this Motion.

[31] Cyr in the Cyr Deposition in the Vermont Negligence Action at pages 118-119 states:

"Q. So it is contingent on their being adequate proof that there is legitimate claim, that is, contingency as to the note?

A. No. The contingency is that there is-the contingency is that essentially the-that there is subsequent-that there was the Governing Agreement that was made subsequent to the promissory note, that then validated the offer of a quantum promissory note and quantum owed to Nagra by Dr. Malhotra.

Q. Okay. And should I understand then, that it's the trustee's position that, upon conclusion of the matter in Vermont, that the Nagra claim will be disallowed for - because of the existence of the governing agreement?

A. No. The estate's position, as has been communicated with Dr. Malhotra's counsel, is that upon the resolution of the litigation in Vermont, that the claim will be reassessed at that time, based on the findings, if any…”

And at pages 121-122 states:

Q. You say, in the second sentence, "had the governing agreement been reduced to writing by attorney Nostrand, Mr. Nagra would have been precluded from pursuit of repayment of the promissory note under the terms of the governing agreement, " Did I read that correctly?

A. Yes

Q. What facts do you have to support the conclusion that Mr. Nagra would have been precluded from pursuing repayment of the nose?

A. On the Nostrand affidavit.

And at page 124:

Q. Give me, if you would, please, each and every fact that you believe supports your claim that the defendants in this Vermont matter are responsible for Mr. Rohrer's [sic] bills?

A. Well it stems from the Governing Agreement had been put into writing, that the quantum - under the claim - under the promissory note would have been - there would have been an insufficient amount - there wouldn't have been a claim against Dr. Malhotra for the promissory note; and, in turn, there wouldn't have been litigation with Nagra, with respect to the jurisdictional matter in Toronto.

[32] It appears that the Trustee, as stated in the Interrogatories to the Cyr Deposition at Exhibit “D” to the Bankrupt’s Affidavit (the “Cyr Interrogatories”):

“…In general terms, the Bankruptcy Trustee and Inspectors discussed that the Bankruptcy Estate would not disallow or change the status of the Nagra proof of claim until there was a finding of negligence made against George W. Nostrand.”

in the Vermont Negligence Action to determine whether Nostrand was negligent in failing to monument the alleged “Governing Agreement”. I note there were two “inspectors” of the Bankruptcy Estate, one of which was Nagra.

[33] I have no evidence before me whether Nagra, as an inspector, participated in approving the commencement and settlement of the Vermont Negligence Action by the Trustee, based on the claim that the Bankruptcy Estate was damaged as a result of Nostrand’s failure to document the Governing Agreement, and relying on the Nostrand Affidavit, that Nagra now takes the position did not exist, and are incorrect, respectively.

[34] I note from the Trial Balance dated at January 3, 2019 (the “Trial Balance”) attached to the letter from Jaffe to Gertler dated January 7, 2019 at Exhibit “J” to the Bankrupt’s Affidavit the (“Jaffe January 7, 2019 Letter”) that indicates a payment from the Defence counsel for the Nostrand Estate dated April 11, 2018 in the amount of $146,743.98 (the “Vermont Negligence Action Settlement Amount”), which forms a significant proportion of the $685,304.53 in receipts in the Bankruptcy Estate.

[35] In addition to the Vermont Negligence Action Settlement Amount, the receipts in the estate included asset realizations by the Trustee of $350,000, and surplus income payments made by the Bankrupt of $183,578.

[36] The Trustee has paid $96,645.80 in interim dividends, including a $70,762.01 dividend payment to Nagra made on September 24, 2014 (the “Nagra Dividend Payment”) and a

$16,076.82 unsecured dividend paid to the second largest Creditor, CRA on its $1,361,924.71 proven claim.

[37] The total disbursements were $441,026.13, including the payment of an additional $23,267.58 Deemed Trust claim to CRA and there was a cash balance remaining in the Estate of $244,278 as of January 3, 2019.

[38] Given the timing of the payments to the Trustee of the Vermont Negligence Action Settlement Amount, and the timing of the interim dividend payments, it does not appear that the Vermont Negligence Action Settlement Amount formed a portion of the Nagra Dividend Payment. The terms of this alleged settlement between the Bankruptcy Estate and the Nostrand estate are not in evidence before me.

[39] Between the March 22, 2016 letter by Gertler to the Trustee and the response in the Jaffe Letter on December 12, 2018, on November 1, 2018 Wilton-Siegel, J. granted an Order under s.38 of the BIA to Nagra to take proceedings against Kiran, the Bankrupt’s wife, to claim shares allegedly owned by her in 1218939 Ontario Ltd. and Nanak Holdings Inc (the “S.38 Action”).

[40] It is likely that the Order in the s.38 Action was obtained after the settlement of the Nagra Claim between the Trustee and Nagra, and removal of “Contingent” status to the Nagra Claim, given the date of the Jaffe Letter and the payment made to the estate of the Vermont Negligence Action Settlement Amount in the Trial Balance in April 11, 2018.

[41] Nagra has also opposed the Bankrupt’s discharge. The Bankrupt has been bankrupt for more than 9 years.

[42] The Expungement of the Nagra Claim, other than the Costs component, has potential impact on many aspects of the Bankruptcy, including the Bankrupt’s discharge after 9 years, the s.38 Action, the final distribution of the remaining recoveries to creditors, and in particular the next largest creditor CRA, and also raises questions regarding the rejection by creditors of the Proposal filed by the Bankrupt, which occurred to a large degree due to Nagra voting against the Proposal, employing the Nagra Claim, apparently at its original $5,994,500.00 amount. It is unclear at what amount of the Nagra Claim the payment of the Nagra Dividend Payment was calculated by the Trustee.

II. Procedural Context Of Expungement Motion

[43] This Motion has a tangled procedural history.

[44] Unusually, by the Order of Associate Justice Jean dated February 4, 2020, Nagra’s responding Motion materials were struck as a result of findings made of abuse of process in preliminary Motions and failure to comply with a Case Timetable imposed by Associate Justice Jean.

[45] In her March 4, 2020 Reasons (the “AJ Jean Reasons”) she wrote: “Thus on February 4, 2020, there remained two, matters before the court:

1. Costs of the abandoned motion to be fixed; and

2. The hearing of the bankrupt's motion to strike Nagra's responding motion record.

Mr. Laan requested an adjournment of the bankrupt's motion to strike on the basis of short service, I refused the adjournment with reasons to follow. I refused the adjournment because:

1. The bankrupt's motion to strike was served on Mr. Laan by facsimile on January 29, 2020. Under the BIA General Rules, rule 6(2) requires that every notice must be received by the addressee at least four days before the event to which it relates if it is ...sent by facsimile or electronic transmission. The bankrupt's motion was received by Mr. Laan at least four days before February 4, 2020 and is therefore served in a timely way. The motion was not short served.

2. Mr. Laan had notice as early as January 24, 2020 that the bankrupt intended to bring a motion to strike. It is clear that Mr. Laan was aware of the basis for the motion,

3. Mr. Laan had more than ample opportunity to deliver responding material for the motion to strike.

4. The materials filed in support of the matin motion to strike were not contentious as they mostly set out the chronological history of the proceedings.

5. I was of the view that the adjournment was sought simply to delay the adjudication.

6. There was no prejudice to Nagra as there was sufficient time to respond to the motion.

7. There is prejudice to the bankrupt as his motion to expunge is being held up by the motions within the motion, and motions within those motions. As well, the bankrupt's application for discharge is being held up by virtue of the uncertainty as to Nagra's standing us a creditor. Nagra opposed the bankrupt's discharge in the fall of 2018. The bankrupt has remained undischarged for going on 6 years. As well, Nagra obtained a s. 38 order from Wilton-Siegel J. and the validity of that order may be in question if Nagra is not a creditor.

8. There is excessive time and costs associated with an adjournment. Costs of the Abandoned Motion

I endorsed the motion to extend with an order fixing costs of the motion at $16,000 on a partial indemnity basis plus HST plus disbursements of $1,869 payable by Nagra forthwith and in any event prior to any further steps being taken by the creditor in the bankruptcy proceedings as fair and reasonable.

Motion to Strike

After hearing submissions of the parties, I endorsed the record: "the motion is granted with costs fixed at $8,971 on a substantial indemnity basis plus HST payable by Nagra forthwith and in any event prior to any further steps being taken by the creditor in this bankruptcy proceeding. Reasons to follow."

These are my reasons.

First, it is clear that Nagra failed to comply with the motion timetable as set forth in my order dated May 28, 2019. This order was made with and on Nagra's consent.

Nagra did not comply with the motion timetable and failed to deliver his responding materials on time. He and his counsel knew that a court order extending the time for delivery of responding materials was needed and that the bankrupt was opposed to the extension .. . A motion to extend the deadline was pending.

Second, Nagra and his legal counsel knew or ought to have known that proceeding to serve and file a responding record in contravention of the order of May 28, 2019 was not permitted. Nonetheless, counsel tendered the responding motion record for filing. Nagra and his legal counsel ought not be permitted to rely on the acceptance for filing by the court clerk who most likely was unaware of the dispute between the parties and of the timing requirements as set forth in my May 28, 2019 order. The tendering of the responding motion record for filing with the court and the acceptance of same by the court clerk was done to avoid having to argue the motion to extend on the merits. This much is clear given Nagra's withdrawal of the motion.

Third, Nagra is indirectly doing what he was not entitled to do by obtaining the filing of the responding motion record.

Fourth, Nagra knew that his responding motion record was out of time and Nagra brought a motion to extend the time for filing responding materials. He cannot take a fresh step while that motion was pending.

Fifth, and most importantly, by circumventing the hearing of the motion to extend, Nagra usurped the role and function of the court to control its own process. I agree with Mr. Gertler's submission that the steps taken by Nagra is an abuse of the court process. For all of these reasons, I granted the bankrupt's motion to strike Nagra's responding motion record.

I ordered costs on a substantial indemnity basis as fair and reasonable. This motion to strike was entirely unnecessary and has driven up costs needlessly. Nagra should be liable for such costs on a higher scale, given what I view as sharp practice.

[46] In her February 4, 2020 Endorsements Associate Justice Jean assessed costs against Nagra in the amount of $16,000 plus HST and disbursements of $1,869, and a further $8,971 plus HST.

[47] Nagra appealed and that appeal was rejected by Conway, J. on May 26, 2021 where she states in her reasons (the “Conway, J. Reasons”):

“In this case, I find no error in principle by the Master in striking the Responding Materials. She was well aware of the history of this case and the timelines imposed on the parties. She did not strike the Responding Materials, however, solely on the basis

that he had not complied with the court's timetable. What she found particularly egregious was that he had scheduled the Motion to Extend, filed the Responding Materials in the face of that motion, and then withdrew the motion. As she found, Mr. Nagra had circumvented the Motion to Extend and thereby usurped the role and function of the court to control its own process. In other words, he had deprived the court of the ability to determine whether or not to extend the timetable. I note that this also deprived Mr. Malhotra of the ability to argue against the extension and to raise issues of prejudice that he might face.

In my view, the test on a motion to strike in these circumstances is not apt. This was not a motion to strike a properly filed pleading or document because of some extraneous factor, such as a failure to pay costs or damages (as in Koohestani). The Master in this case struck the Responding Materials because Mr. Nagra was not permitted to file them in the first place, absent a court order. Mr. Malhotra's motion before the Master was an attempt to recognize that Mr. Nagra was not entitled to file the Responding Materials without an extension order, and that Mr. Nagra was taking matters into his own hands and seeking to do indirectly what he was not allowed to do directly. The Master refused to allow Mr. Nagra to do so. That was a proper exercise of her discretion in controlling the court's process and there is no basis for appellate interference.

The appeal is dismissed. Costs of the appeal are fixed at $8000, on a partial indemnity basis, and are payable by Mr. Nagra to Mr. Malhotra within 30 days.”

[48] On this Motion Nagra was permitted by me in my March 17, 2022 endorsement to file a Factum and book of Authorities.

[49] Despite my Order, counsel for Nagra also filed a Compendium and an Exhibit Brief (the “Exhibit Brief”) from the Cross-Examination of the Bankrupt held on July 28, 2021, and July 28, 2021 and resumed on August 11, 2021 (“Bankrupt’s 2021 Examination”) and Kiran held on August 11, 2021 (the “Kiran Examination”)(collectively, the “Examinations”)

[50] Also, Nagra never obtained leave of the Court to conduct any of these Examinations under Rule 14 of the Bankruptcy and Insolvency General Rules (the “BIA Rules”).

[51] The “Exhibit Brief” filed by Nagra from the Examinations, again, despite the Orders of Associate Justice Jean, and Conway, J., attempted to introduce as “Exhibits” the Statement of Defence of the Bankrupt in the Brampton Collection Action, affidavits sworn by the Bankrupt in the Brampton Collection Action (but lacking all of the dozens of exhibits to those affidavits) that were not filed on this Motion by the Bankrupt and an email purporting to be from the Bankrupt to Nagra dated November 24, 2007. The filing of this “Exhibit Brief” was not specifically objected to by counsel for the Bankrupt.

[52] The Factum filed by Nagra (the “Nagra Factum”) is not so much a Factum, but a summary of the cross-examinations of the Bankrupt and Kiran, conducted without obtaining leave, using

excerpts and summarizing sentences to argue that the Bankrupt lacks credibility, and quoting from the “Exhibits” filed in the Exhibit Book. This credibility contest called by Nagra is extraordinarily problematic for Nagra, given his enormous credibility problems on this Motion, that I will discuss in detail.

[53] On this motion, the Bankrupt has filed the three volume Motion Record of the Bankrupt (the “Bankrupt’s Motion Record”). The Bankrupt’s Motion Record contains the Affidavit of the Bankrupt sworn February 13, 2019 (and exhibits thereto) (the “Bankrupt’s Affidavit”), the Affidavit of Kiran sworn February 13, 2019 (the “Kiran Affidavit”) and the Affidavit of Sashi Airi sworn February 11, 2019 (the “Airi 2019 Affidavit”) which attaches as exhibits his prior affidavits sworn in 2013 (the “Airi 2013 Affidavit”) 2011 (the “Airi 2011 Affidavit”) and 2017 (the “Airi 2017 Affidavit”).

[54] Attached as Exhibit “R” to the Bankrupt’s Affidavit is the Nostrand Affidavit in support of the Bankrupt in the Brampton Collection Action.

[55] The Bankrupt also filed a Supplementary Motion Record, with the Supplementary Affidavit of the Bankrupt sworn May 26, 2022 (the “Bankrupt’s Supplementary Affidavit”) and attaching, inter alia, the AJ Jean Reasons and the Conway, J. Reasons.

[56] The Bankrupt has filed a Factum (the “Bankrupt’s Factum”), a Reply Factum (the “Bankrupt’s Reply Factum”) and a Compendium (the “Bankrupt’s Compendium”).

Position of the Trustee

[57] Counsel for the Bankrupt advised that the Trustee was not taking a position on the Bankrupt’s Motion and no materials were filed by the Trustee, and Jaffe did not appear. It would have been helpful on this Motion for the Trustee to have provided a Report summarizing the procedural and administrative steps taken in the Bankruptcy Estate and the realizations made to date and the sources of those realizations, and to report first hand on the rationale for the settlement with Nagra of the Nagra Claim.

III) Evidence on the Motion The Context of the Nagra Claim

[58] Nagra is a convicted Felon in the United States.

[59] Ordinarily that fact would have zero relevance to the determination of the validity of a proof of claim in a Canadian Bankruptcy Court, based on the enforcement of the Share Purchase Agreement where the purchase price for the Shares was paid to the vendor Nagra by the purchaser Bankrupt executing a Promissory Note.

[60] In this case the circumstances leading up to the execution of that Share Purchase Agreement and Promissory Note are extraordinarily relevant regarding the allegations made by

the Bankrupt that the Note is not enforceable by Nagra as a result of a subsequent, allegedly superseding, oral “Governing Agreement” between the Bankrupt and Nagra that the Bankrupt alleges prevents the enforcement of the Promissory Note and, consequently, requires the Nagra Claim to be Expunged by the Court on this Motion.

[61] The Bankrupt alleges that the existence of the Governing Agreement was crucial to the sentencing decisions in Nagra’s Criminal Proceedings made by Judge William K. Sessions III, currently a Senior District Judge of the United States District Court for the District of Vermont (similar to Supernumerary status in Ontario) (“Judge Sessions”). Sessions was appointed in 1995, was Chief Judge of the United States District Court for the District of Vermont from 2002 to 2010 and assumed Senior Judge status in June 15, 2014. From 1999 to 2009 he was Vice-Chair of the United States Sentencing Commission and was its Chair for 2009-2010. A very experienced Criminal Jurist.

[62] At the hearing of the Motion I confused Judge Sessions with Judge William Steele Sessions, who was also a United States District Court Judge, but for the United States District Court for the Western District of Texas, and was later appointed Director of the Federal Bureau of Investigation.

[63] The factual circumstances for the guilty plea of Nagra are contained in the Plea Agreement signed by Nagra on October 2^nd, 2008 (the “Plea Agreement”). I have attached as Schedule “B” to these reasons the entirety of the Plea Agreement, given its central importance on this Motion, and the possible implications on that Plea Agreement, and the facts allocated by Nagra, by Nagra taking the positions he has on this Motion, the appeal of Associate Justice Jean’s decision and in the Brampton Collection Action.

[64] At Exhibit “L” to the Malhotra Affidavit is the Plea Agreement which relevant terms state:

“1. GURDEEP NAGRA agrees to waive his right to proceed by Indictment and plead guilty to an Information charging him with one count of conspiracy, in violation of 18 U.S.C. § 371, to knowingly make false statements or reports for the purpose of influencing in any way the actions of any institution, the accounts of which we insured by the Federal Deposit Insurance Corporation, upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment or loan, or any change or extension of any of the same, in violation of 18 U.S.C. § 1014; and one count of knowingly hiring for employment, within a 12 month period, at least 10 individuals with actual knowledge that the individuals were aliens as described in 8 U.S.C. § l324n(h)(3). in violation of 8 U.S.C.

§ l324(a)(3)(A).

4. It is the understanding of the parties to this agreement that the plea will be entered under oath and in accordance with Rule 11 of the Federal Rules of Criminal Procedure. The defendant represents that he intends to plead guilty because he is, in fact, guilty of the crimes with which he is charged.

5. GURDEEP NAGRA agrees and understands that it is a condition of this agreement that he refrain from committing any further crimes whether federal, state or local and that, upon release, he will abide by all conditions of release.

6. The United States agrees that in the event that GURDEEP NAGRA fully and completely abides by all conditions of this agreement, the United States will:

(a) not prosecute him in the District of Vermont for any other criminal offenses known to the United States Attorney's Office as of the date of the signing of this plea agreement committed by him in the District of Vermont relative to (1) fraud or deceit or false statements relating to a financial institution and (2) hiring and recruiting aliens for employment in the United States, harboring aliens, or any deceit or false statements made in the course of dealing with immigration authorities;

(b) recommend to Probation that it find that neither the Bank to which he made the false statements or reports charged in Count One of the Information nor any other bank involved suffered any loss as a result of the transaction but if Probation rejects this recommendation, that the United States will have no further obligation concerning Defendant's loss calculations;

(c) recommend to the sentencing Court that he be sentenced to a term of imprisonment at the low end of the applicable Sentencing Guidelines range;

(d) Not contest any finding by Probation that he did not utilize a sophisticated means, as analyzed in § 2Bl.l(b)(9)(C); and

(e) recommend that he receive credit for acceptance of responsibility under Guideline Section 3El.1, provided that he cooperates truthfully and completely with the Probation Office during the presentence investigation and abides by the conditions of his release and further provided that no new information comes to the attention of the United States Attorney's Office relative to the issue of his receiving credit for acceptance of responsibility.

8. If the United States determines, in its sole discretion, that the defendant has committed any offense after the date of this agreement, or violated any condition of release, or has failed to cooperate fully with the Probation Office, or has provided any intentionally false, incomplete or misleading information to Probation, the United States' obligations in the previous paragraph of this agreement will be void and the United States will have the right to recommend that the Court impose any sentence authorized by law and will have the right to prosecute the defendant for any other offenses he may have committed in the District of Vermont. The defendant understands and agrees that, under such circumstances, he will have no right to withdraw his previously entered plea of guilty.

9. GURDEEP NAGRA fully understands that the sentence to be imposed on him is within the sole discretion of the Court. The defendant may not withdraw his plea because the Court declines to follow any recommendation, motion or stipulation of the parties to this agreement other than an agreement between the parties pursuant to Federal Rule of Criminal Procedure l l(c)(l)(C). The United States does not make any promises or representations as to what sentence GURDEEP NAGRA will receive. The United States specifically reserves the right to allocute at sentencing. There shall be no limit on the information the United States may present to the Court and the Probation Office relative to sentencing or the positions the United States may take regarding sentencing (except as specifically provided elsewhere in this agreement). The United States also reserves the right to correct any misstatement of fact made during the sentencing process, to oppose any motion to withdraw a plea of guilty previously entered and to support on appeal any decisions of the sentencing Court whether in agreement or in conflict with recommendations and stipulations of the parties.

10. GURDEEP NAGRA agrees and fully understands that in the event that the United States determines that he has failed to comply with any provision of this agreement; made any false statement to investigators or attorneys of the United States or willfully failed to disclose: information; made any false statements or committed any perjury before a grand jury, before any trial court, or at any other proceeding; had any unauthorized contact with any potential defendants in this case or in cases in which he is a potential witness pursuant to this agreement; or since the date of this agreement, committed any state, local or federal offense or has failed to disclose any crimes he has committed; the United States will have the right to:

(1) terminate this agreement and prosecute him for any and all offenses, including false statements and perjury, with which he could properly be charged (including reinstatement of any charges dismissed pursuant to this agreement), or

(2) terminate only its obligations under this agreement while retaining the defendant's guilty plea.

Furthermore, GURDEEP NAGRA fully understands that should he fail to fully comply with any provision of this agreement, the United States will have the right to use the agreement itself against him at any trial, hearing or sentencing. He also understands that the Government may use any sworn or unsworn statements given by him and any information, materials, documents or objects provided by him to the United States pursuant to this agreement, including self-incriminating information referred to in paragraph 4 of this agreement, against him. The defendant waives his right to challenge the admissibility of this agreement and the information provided pursuant to this agreement into evidence under Federal Rule of Criminal Procedure 11 or any other provision of law.

12. GURDEEP NAGRA understands and agrees that the determination of whether he has abided by all the conditions of this agreement and the determination of whether he has

cooperated fully and completely (and the determination of whether he has provided substantial assistance to the Government) are questions within the sole discretion of the United States. The decisions of the United States with regard to these questions will be binding on the defendant and will not be subject to challenge incourt or otherwise.

13. It is further understood and agreed by the parties that should the defendant's plea not be accepted by the Court for whatever reason, or later be withdrawn or vacated, this agreement may be voided at the option of the United States and the defendant may be prosecuted for any and all offenses otherwise permissible. If the plea is withdrawn or vacated on motion of the defendant, the defendant herein expressly agrees that the entire period of time that elapses between the signing of this agreement statute of limitations. The defendant also expressly agrees to waive any defense to the reprosecution of charges that he might have under the Speedy Trial Act, the speedy trial guarantees of the Constitution, or any other constitutional or statutory provision and the withdrawal or vacatur of the plea shall be disregarded in calculating whether the prosecution of any charges is timely under the applicable.

14. GURDEEP NAGRA agrees that he will provide a copy of any financial affidavit prepared during the course of the Probation Office's presentence investigation to the United States at the same time that it is provided to the Probation Office. In addition, he specifically hereby authorizes the Probation Office to provide the United States a copy of any and all financial affidavits submitted to it by him.

15. In voluntarily pleading guilty to the charges in the Information, GURDEEP NAGRA acknowledges that he understands the nature of the charges to which the plea is offered. He also acknowledges that he has the right to plead not guilty or to persist in a plea of not guilty; that he has the right to be tried by a jury that be has the right to be represented by counsel - and if necessary have the court appoint counsel- at trial and at every other stage of the proceeding; that at trial he has the right to confront and cross-examine adverse witnesses; that he has the right to be protected from compelled self-incrimination; that he has the right to testify and present evidence and to compel the attendance of witnesses; that if a plea of guilty is accepted by the Court, there will be no further trial of any kind, so that by pleading guilty he waives the right to a trial and the other rights enumerated here.

16. GURDEEP NAGRA expressly states that he makes this agreement of his own free will, with full knowledge and understanding of the agreement and with the advice and assistance of his counsel, Lisa Shelkrot, Esq. GURDEEP NAGRA further states that his plea of guilty is not the result of any threats or of any promises beyond the provisions of this agreement. Furthermore, GURDEEP NAGRA expressly states that he is fully satisfied with the representation provided to him by his attorney, Lisa Shelkrot, Esq., and has had full opportunity to consult with his attorney concerning this agreement, concerning the applicability and impact of the Sentencing Guidelines (including, but not limited to, the

relevant conduct provisions of Guideline Section 1B1.3), and concerning the potential terms and conditions of supervised release.”

Evidence of the Bankrupt

[65] Because of the AJ Jean Reasons and the Conway, J. Reasons, the only admissible evidence on this motion is the Evidence filed by the Bankrupt, and the Cross-Examination transcripts of the examinations of the Bankrupt and Kiran on their affidavits.

[66] For the Factual circumstances that resulted in the purchase of shares by the Bankrupt from Nagra, and the granting of the Promissory Note by the Bankrupt to Nagra that is the basis for the Nagra Claim, the Bankrupt’s Affidavit the Bankrupt states:

“The Vermont Hotels

19. Nagra and I were ''partners "investors/co-shareholders in a series of hotels and development property in Vermont and New Hampshire. The investments were as follows:

• NS Holdings Ltd. Inc., a Pennsylvania corporation which owned and operated the Quality Inn and Suites and the Hampton Inn in Brattleboro, Vermont;

• Nanak Resorts Inc., a Vermont corporation which owned and operated the Red Roof Inn in Killington, Vermont;

• Nanak Hospitality, LLC, a Vermont limited liability company that held title to a

37.5 +/- acre parcel of underdeveloped land in Killington, Vermont;

• Guru Nanak Hotels, LLC, a New Hampshire limited liability company that owned and operated the Hampton Inn and Suites in Keene, New Hampshire;

• Nanak Hotel Group, LLC, a management entity that did not own real estate;

• Nanak Hotels, LLP, formerly operated the Hampton Inn Brattleboro;

• Nanak Foods, LLC, in connection with the El Chico Restaurant at Brattleboro;

• Nanak Lodging, LLC, an unfunded Massachusetts entity;

• Nanak Holdings, Ltd., formerly operated the Quality Inn (that became the Ramada Inn) in Brattleboro;

• Maples Lodging, Inc., an entity formed to hold title to real estate in Brattleboro;

(all collectively referred to as the "Vermont Hotels"). At all material times, I operated a full-time medical practice in Brampton, Ontario and I was therefore a passive investor in the Vermont Hotels.

20. There were originally three "partners" - Nagra, Vic Singh ("Singh") and me. Singh exited the corporate "partnership" in 2006 as a result of a personal issue with Nagra. I provided the funds necessary to buy out Singh's interest. Thereafter, although I had provided the funds for a two-third ownership interest in the Vermont Hotels, Nagra and I considered ourselves to be "50-50" partners in the Vermont Hotels.

21. I was not involved in the day to day management of the Vermont Hotels - nor was I involved in arranging financing for the Vermont Hotels including the contemplated expansion by way of the building of a new hotel in Brattleboro, Vermont. Nagra was solely responsible for the day to day operations as well as for arranging the bank financing. I trusted Nagra to represent my interests in the Vermont Hotels. I now know that this trust was ill founded.

22. I learned that in the course of Nagra's management of the Vermont Hotels he was involved in the following misconduct:

a. BLM ("BLM") filed a proof of claim in my bankruptcy estate in the amount of $400,000.00 (U.S.) based on a guaranty I allegedly signed in Vermont on May 23, 2006. I was not in Vermont on that date. I was working in my Brampton medical office. Attached hereto and marked as Exhibit "K" to this my Affidavit is a copy of Gertler' s April 11, 2016 letter to the Trustee in respect of the BLM Claim. As may be noted from that letter, included as an attachment was the affidavit of Mr. Shashi Airi ("Airi") sworn January 15, 2013 in which affidavit Airi deposes that the BLM Guarantee was forged by Nagra:

"Nagra then asked me whether I would sign Malhotra 's signature on the document. At the same time, he showed me another document with Malhotra 's signature on it so that I would be able to accurately copy Malhotra 's signature. I refused to forge Malhotra 's signature on the document. Bajaj then said to Nagra, "Sunny, you have done it before. Why don't you do it? 11 Nagra then signed the document in my presence. 11

b. Nagra forged my signature on a loan application/credit card application with American Express and received a $100,000.00 line of credit. Nagra used the full amount of the line of credit.;

c. Nagra forged my wife Kiran's signature on an American Express credit card application and received a credit card in the amount of $100,000.00. Nagra used the credit card to borrow $100,000;

d. Nagra forged my signature on other credit card applications. Nagra used these credit cards for his own uses.

e. Nagra falsified documents on a loan application to the Chittenden Bank by inflating construction costs for the Hampton Inn, Brattleboro. He was charged with conspiracy in violation of 18 USCS 371, (to knowingly make false statements or reports for the purposes of obtaining bank financing). Nagra pled guilty to that felony. Attached hereto and marked as Exhibit "L" to this my Affidavit is a copy of the Plea Agreement entered into between the United States of America ("USA") and Nagra dated October 2, 2008.

f. Nagra was also charged with one count of knowingly employing illegal aliens at the Quality Inn and at the Hampton Inn in Brattleboro. He pled guilty to that felony.

g. After Nagra was charged with conspiracy to defraud and employing illegal aliens, etc. and was released on bail, Nagra falsified a $125,000.00 construction financing invoice on the Keene New Hampshire project to CIT and received $125,000.00. These funds were not deposited to the Vermont Hotels. Attached hereto as Exhibit "M" to this my Affidavit is a copy of the (i) November 14, 2007 letter from Elizabeth Sackett, the lawyer for CIT to Nostrand; (ii) her November 16, 2007 email to Nostrand; and (iii) her subsequent November 16, 2007 letter to Nostrand. Paragraph 3 on page 2 relates to the $125,000.00 payment in question. At the request of Nostrand, the November 16, 2007 letter revised paragraph 3 from the November 14, 2007 letter to change the reference from "Nagra fraudulently negotiated to Nagra inappropriately negotiated. This amount was repaid through the BLVNM financing referred to herein.

h. Airi has previously sworn two affidavits in connection with my legal proceedings with Nagra and with BLM. Attached hereto and marked as Exhibit "N" to this my Affidavit is a copy of Airi's November 28, 2011 affidavit in respect of my legal proceedings with Nagra. Attached hereto and marked as Exhibit "O" to this my Affidavit is a copy of Airi's January

15, 2013 affidavit in respect of BLM. In each of these affidavits Airi set out the numerous instances of misconduct on the part of Nagra relating to me, Kiran and the Vermont Hotels. A fresh affidavit from Airi in respect of these matters is included in my motion record.

Autumn 2007-Reorganization of the Vermont Hotels and Buy out of Nagra's interest

23. As noted above, Nagra had prepared false loan disclosure documentation for the Chittenden Bank to secure a loan to build the Hampton Inn, Brattleboro. On or about October 26, 2007 the FBI raided the Vermont Hotels and thereafter Nagra was charged with conspiracy and with employing illegal aliens. As a result of the charges laid against Nagra, (i) Chittenden Bank, one of the Vermont Hotel lenders demanded repayment of its loans in respect of the Quality Inn and the Hampton Inn and placed the two hotels into receivership naming Raymond J. Obuchouski as Court Approved Receiver (the "Receiver"); (ii) CIT Lending Service Corporation which had advanced loans to Guru Nanak Hotels LLC demanded repayment of a loan of $6,054,548.00 and a further (bridge) loan of$1,947,500.00; and (iii) the Bank of Las Vegas New Mexico ("BLVNM") refused to further entertain a loan application we had made to it for

$7,195,000 to refinance the Vermont Hotels unless Nagra was removed as a principal of the Vermont Hotels. I had personally guaranteed the liabilities of the Vermont Hotels to Chittenden Bank and to CIT. I had a personal exposure of about

$11,000,000.00.

24. Needless to say, I was "blindsided" by all of these events as I had trusted my business partner Nagra.

25. Nagra had to be removed as a principal from the Vermont Hotels corporate structure. The Vermont Hotels' lawyer was Nostrand. However, Nagra agreed that Nostrand could act for me personally in buying out Nagra's interest (in order to placate the banks). Nagra hired Tom Carlson of Langrock, Sperry & Wool LLP as his lawyer.

26. Nagra and his lawyer prepared an agreement of purchase and sale setting out the terms and conditions of my purchase of Nagra's interest in the Vermont Hotels. This agreement of purchase and sale included as Schedule "A" the value of the assets and a list of the liabilities relating to the Vermont Hotels. Notwithstanding anything to the contrary claimed by Nagra, Schedule "A" was prepared solely and exclusively by Nagra and his lawyer. I was forced to rely on Nagra for the accuracy of Schedule "A" as I had no independent knowledge of the value ascribed to the Vermont Hotels nor was there time to conduct any due diligence given the extremely limited time constraint. As previously noted, I was a passive investor in the Vermont Hotels and relied totally on Nagra in respect of the ongoing operations and financing of the Vermont Hotels. I

learned that Nagra's valuation of the Vermont Hotels was greatly inflated and his summary of the liabilities of the Vermont Hotels was severely understated.

27. Based upon Schedule "A" to the Purchase Agreement, we agreed on a purchase price of $3,500,000.00 (the "Purchase Price"). The Purchase Price was to be paid by way of a promissory note to be given by me to Nagra in the amount of $3,500,000.00 (being the Nagra Note).

28. Ultimately the Purchase Agreement and the Nagra Note were amended to reflect the concerns of BLVNM that Nagra not receive any money from the refinancing and the final form of the Purchase Agreement and the Nagra Nate are attached hereto and marked as Exhibit "P" to this my Affidavit. This cleared the way for completion of the BLVNM financing that was scheduled to take place on December 14, 2007 with funds to be used from the BLVNM financing for the payout of the Chittenden Bank, the discharge of its receiver as well as for the payment of CIT financing.

The Governing Agreement

29. On December 11, 2007 Danielle Fogarty ("Fogarty") the lawyer acting for me in connection with the BLVNM financing informed me that the outstanding liabilities of the Vermont Hotels had been severely understated. She identified the following non- disclosed liabilities:

a. To Limon an amount not yet determined (this debt is further referred to in paragraph 40(d) herein;

b. A $105,000 writ of attachment against the Keene, New Hampshire property ("Keene");

c. A $1,500,000 second new writ of execution against Keene.

Attached hereto and marked as Exhibit "Q" to this my Affidavit is a copy of Fogarty's December 11, 2007 emails to me. The Andrew Patel referred to in one of the emails was the BLVMM account manager.

30. Airi, the regional manager of the Vermont Hotels had also advised Kiran that the financial position of the Vermont Hotels was much worse than Nagra had represented.

31. As a result of the foregoing, a meeting was held at Nostrand's office on December 11, 2007 to address these issues. In attendance were Nagra, Kiran, Nostrand and Airi. I attended by way of conference call.

32. The BLVNM financing required that all creditors be paid. This would require a further advance to the Vermont Hotels to pay off creditors. I had now been made aware (through Fogarty) that the Vermont Hotels had additional liabilities not disclosed by Nagra. I had now been advised by Airi (through Kiran) that the financial position of the Vermont Hotels was much worse than Nagra had represented. As such, I advised Nagra that I was not prepared to complete the purchase of his shares in the Vermont Hotels; nor was I prepared to advance further funds to the Vermont Hotels unless and until the Purchase Agreement and the Promissory Note were amended.

33. At this meeting, Nagra and I agreed that the Agreement of Purchase and Sale and the Nagra Note were amended by what became known as the Governing Agreement as follows:

a. Nagra would assist me in selling all of the Hotel Properties;

b. Out of the proceeds of such sales, all of the Companies' debts would be paid;

c. After such debts were paid, I would then be paid the sum of

$1,975,000 which Nagra had represented reflected the excess amount that I had invested in the Hotel Properties; and

d. if, and only if, there were any monies remaining after all of the foregoing was completed, would Nagra be paid anything pursuant to the Promissory Note.

Given the time and pressure which we faced, no calculations were done nor due diligence undertaken to determine if the amount of $1,975,000 Nagra represented as my excess contribution to the Vermont Hotels referred to in subparagraph (c) was even accurate but it was clear that Nagra would be paid nothing for his shares in the Vermont Hotels if those shares proved valueless (if the proceeds from the sale of the Vermont Hotels were insufficient to pay their creditors in full and to pay me the $1,975,000.00).

34. As previously noted, the meeting at which the Governing Agreement was agreed to by Nagra and me took place at Nostrand's office in Nostrand's presence. Nostrand swore an affidavit on January 24, 2013 [the "Nostrand Affidavit"] wherein he confirms the existence and terms of the Governing Agreement [in paragraph 31 thereof]. Attached hereto and marked as Exhibit "R" to this my Affidavit is a true copy of the Nostrand

Affidavit. Nostrand is clear in paragraph 31 of the Nostrand Affidavit that "the agreement [the "Governing Agreement] made at that meeting was to be separate and distinct from, and to supersede all other written Agreements of Purchase and Sale and Promissory Notes [emphasis added]. The Nostrand Affidavit also provides a summary of the circumstances leading up to the entering into of the Governing Agreement by Nagra and me and the pressures I was under at the time. Nostrand passed away in September 2016.

35. As noted above, Airi was also at the meeting at Nostrand's office where Nagra and I agreed to the terms of the Governing Agreement. Airi also swore an affidavit confirming the terms of the Governing Agreement on January 15, 2013 (that is found at Exhibit "O" to this my Affidavit) (the "Airi Affidavit). Airi deposes in paragraphs 13--22 thereof that:

"13. On or about December 10, 2007, I picked up Kiran Malhotra ("Kiran ''), Malhotra 's wife, from the airport in Boston, upon her arrival from Ontario. At this time, I told her that there were outstanding debts of over a million dollars on the Hotel Properties. She was not aware of these debts. These debts included, among other things, writs from contractors and unpaid vendor invoices and bills.

14. I became aware of these outstanding debts, invoices and writs when, after the FBI raid on October 26, 2007, they were passed on to me as the Regional Director of the Hotel Properties.

15. Kiran shortly thereafter contacted Nagra and advised him that she and Malhotra were not prepared to proceed with the closing of the agreement of purchase and sale transaction given that they now knew about these debts. Nagra insisted that there was a significant amount of equity in the Hotel Properties, such that all of the outstanding debts would be paid and that Malhotra would still get his financial investment in the Hotel Property returned to him. I was with Nagra when Kiran called him on the phone and had this discussion.

16. On or about December 11, 2007, as a result of learning about the undisclosed debts, a meeting was held at the office of George Nostrand, Malhotra 's attorney ("Nostrand''). Nostrand, Kiran, Nagra and myself were present. Malhotra who was in Ontario, participated by telephone.

17. At said meeting, Malhotra and Kiran both repeatedly stated that they were very reluctant to proceed with the Agreement of Purchase and Sale and Promissory Note which had been previously negotiated.

18. Nagra insisted, although he did not produce any evidence to back up his claims, that there was sufficient equity in the Hotel Properties such that upon the sale of the Hotel Properties, all the debts would be paid, Malhotra would get all of his

investment back and Malhotra would not have to personally repay any of the Hotel Properties' debts.

19. Notwithstanding Nagra 's assurances, Malhotra and Kiran were still reluctant to proceed with completing the purchase of Nagra 's interest in the Hotel Properties. Malhotra emphasized that he did not want to lose any more money than potentially had been lost through his initial investment in the Hotel Properties.

20. Malhotra, Kiran and Nagra discussed entering into a new agreement, based on Nagra 's insistence that the Hotel Properties still had sufficient equity, whereby:

(a) All of the Hotel Properties would be sold;

(b) All outstanding debts would be paid;

(c) After such debts were paid, Malhotra would get all of the monies back from his investment in the Hotel Properties; and

(d) If there were any monies remaining after Malhotra was repaid his investment, Nagra and Malhotra would split such funds equally.

21. Nostrand told Malhotra and Kiran that it seemed like Nagra 's analysis of the equity in the Hotel Properties was correct and that, if the Hotel Properties sold for the amount that Nagra believed they would, then it was not a bad deal for Malhotra to make.

22. Based on all of the foregoing, Malhotra agreement to the new arrangement, as set out above.

Implementation of the Governing Agreement

36. Thereafter Nagra and I proceeded on the basis that the Vermont Governing Agreement was the operative agreement.

37. Kiran and I had to that point made substantial advances to the Vermont Hotels as follows in the fall and winter of 2007:

September 2007

$800,000.00

December 7, 2007

$750,000.00

December 10, 2007

$500,000.00

These amounts totalled $2,050,000.00. As noted above Kiran and I were not prepared to make any further advances to the Vermont Hotels without Nagra having agreed to the Governing Agreement.

38. On the basis that Nagra had agreed to the Governing Agreement, on December 13 and 14, 2007 Kiran advanced a further $450,000.00 to the Vermont Hotels to allow the BLVNM financing to be completed. The BLVNM financing proceeded on December 14, 2007; the creditors of the Vermont Hotels were paid; the Court Appointed Receiver released its interest and CIT was paid. Attached hereto and marked as Exhibit "S" to this my Affidavit is a copy of the Receiver's December 14, 2007 Report to the Windham Superior Court. In paragraph 15 thereof, the Receiver Notes:

39. The Receiver has been advised that the corporate defendants are in the process of a refinancing which will result in payments of the outstanding obligations to Chittenden Bank and Vermont Economic Development Authority, and correspondingly result in seeking termination of the receivership. The Receiver has worked with the corporate defendants as to provide for an orderly transition to occur on Friday, December 14, 200 7, at which time, assuming that the closing occurs and the requisite payoffs are received, and escrows for any remaining obligations which may exist or have been incurred but not having been invoiced or paid, having been funded, then the Receiver seeks to be discharged of his obligation pursuant to the Court Orders both as Receiver and as to his duties for collection, management and reporting thereunder.

40. Attached hereto and marked as Exhibit "T" to this my Affidavit is a copy of the Reconciliation of Funds Received and Disbursed into of funds transferred to Fogarty's Interest on Lawyers Trust Account (IOLTA) prepared by Fogarty’s office in respect of the BLVNM financing. As may be noted from the Reconciliation (i) the BLVNM (and its partner bank the Zion Bank) advanced $7,144,192.00; and (ii) Kiran advanced $1,700,000.00 to the Vermont Hotels. From the loan proceeds (i) Vermont Economic Development Authority ("VEDA") received $826,233.41; (ii) Chittenden Bank received $6,625,171.00; (iii) CIT received $255,396.00; and (iv) the Receiver received $201,029.00. As a result of the BLVNM financing and Kiran's further advances to the Vermont Hotels (i) the Chittenden Bank was repaid and the receivership ended, CIT was paid and VEDA was paid.

41. Thereafter all parties-including Nagra-proceeded to implement the Vermont Governing Agreement by way of the marketing and sale of the Vermont Hotels.

(a) The Hampton Inn Brattleboro property was sold on May 29, 2008 for

$6,525,000.00. The net sale proceeds were $493,090.97. Attached hereto and marked as Exhibit "U" to this my Affidavit is the Seller's Closing Statement and supporting documentation relating to the sale of the Hampton Inn, Brattleboro;

(b) The Ramada Inn Brattleboro property was sold on December 31, 2009 for

$1,829,000.00. There was a loss on the sale of this property. Attached hereto and marked as Exhibit "V" to this my Affidavit is a copy of the Receipts and Disbursements Statement (the "Statement") relating to the sale of the Ramada Inn Brattleboro. In addition to the payments set out on the Statement, we were also required to pay $206,616.00 in outstanding city taxes and water and sewer charges;

(c) The Red Roof in Killington, Vermont was sold on July 23, 2008 for $3,100,000.00 to Dr. Daljit Singh Kamboj, Kambol Tarsem Singh Chandi and Surinder Kaur Chandi (collectively the "Purchasers") to partially satisfy a debt owed to Dr. Daljit Singh Kamboj. The Purchasers were credited with (i) $642,500.78 in respect of the settlement of a commercial arrangement that had been entered into by Nagra on behalf of Nanak Resorts Inc.; (ii) $118,398.60 for reimbursement for closing expenses; (iii) expenses for Buyer of $119,508; and (iv) broker's fees of

$30,000.00. The net proceeds of sale were $334,050.77. Attached hereto and marked as Exhibit "W" to this my Affidavit is a copy of the Seller's Closing Statement, the Buyer's Closing Statement together with the Bank payout statement in respect of the sale of the Red Roof Inn;

(d) The land located at Killington Road (Town Highway 52) in Killington was lost in a foreclosure action commenced by Dr. Limon for non-payment of a mortgage. Attached hereto and marked as Exhibit "X" to this my Affidavit is a copy of the September 5, 2008 Notice of Intent to Foreclose and accelerate loan balance from Ricardo Limon and Patricia Limon to Nanak Hospitality LLC. This mortgage had been registered as a result of Nagra's failure to disclose in Schedule "A" to the Agreement of Purchase and Sale that Limon had a $400,000.00 mortgage on one of the properties that were subject to the BLVNM financing. So that the financing could be completed in December 2007, Limon agreed to discharge that mortgage and take a first mortgage on this land. The Vermont Hotels paid Limon $115,000.00 as part of this restructuring.;

(e) The unfinished building in Killington was quit claimed to Dr. Daljeet Dingh Kamboj in settlement of The State of New Hampshire action docket no.217- 2010- CV-393 wherein Daljeet Dingh Kamboj was the plaintiff and Guru Nanak Hotels LLC was the Defendant. Attached hereto and marked as Exhibit "Y" to this my Affidavit is a copy of the November 8, 2010 Settlement Agreement;

(f) The unfinished Keene Hotel on Key Road in Keene was sold on January 24, 2011 (not January 24, 2010) as indicated in the settlement statement for $800,000.00 to Keene Key LLC. The net proceeds of sale were $128,000.00. Once legal fees and commission was paid, there were no net sale proceeds from the sale of this hotel. Attached hereto and marked as Exhibit "Z" to this my Affidavit is a copy of the Settlement Statement together with Schedule "A" relating to the sale of this property.

From the net proceeds from the sale of the Vermont Hotels were $438,484.34 of which:

(a) $32,000.00 was paid to the State of Vermont to pay for outstanding room and meal taxes for the Killington Hotel;

(b) (at Nagra's insistence) $225,000.00 was paid to Nagra's uncle Parmjit Kahlon to pay off Parmjit Kahlon's loan to Nanak Hotel Group. Attached hereto and marked as Exhibit "AA" to this my Affidavit is the November 7, 2011 affidavit of Parmjit Kahlon confirming said payment; and

(c) the balance of the funds were used for ongoing operations until the Vermont Hotels were completely disposed of.

41. The marketing and sale of the Vermont properties was completed by January, 2011 when the property in Keene was sold. The process had taken longer than expected given the downturn in the economy in the fall of 2008. Further, as a result of the downturn in the economy the net sale proceeds from the disposition of the Vermont Hotels was less than might have been hoped for. As a result, I did not recover any of the advances I had made to the Vermont Hotels as contemplated by subparagraph (c) of the Governing Agreement-let alone have funds left over to be paid to Nagra pursuant to subparagraph

(c) of the Governing Agreement. Further Kiran did not recover any of the advances she had made to the Vermont Hotels.

Nagra Relies on Governing Agreement to Obtain Lesser Sentence

42. Nagra was charged with conspiracy and with employing illegal aliens. He was convicted and sentenced on May 7, 2009. The value of the Promissory Note became an issue in the sentencing.

43. In the Sentencing Memorandum of the United States, after addressing Nagra's conduct, the United States states the following (at the bottom of page 8):

"The Courts sentence must also reflect the seriousness of the offences as set forth, promote respect for the law and provide punishment. Defendant has flagrantly flouted the law. He is in this country illegally. He has lied at every turn and has done all this not just to survive but to become rich. Perhaps equally important, Defendant has in fact become rich. The hotels for which he committed fraud and for which he employed illegal aliens for so long have been bought by his ex-partner, Dr. Malhotra, and Defendant is to receive $3.5 Million. Surely the sequence of lies, crimes and enrichment should not be rewarded in this Court as well.

Attached hereto and marked as Exhibit "BB" to this my Affidavit is a copy of the Sentencing Memorandum of the United States.

44. In Nagra's Sentencing Memorandum and Motion for Downward Departure (the

"Nagra Sentencing Memorandum"), on page 2, Nagra pleads:

"The sentencing guideline for Count 1, conspiracy to make a false statement of a loan document, is correctly calculated in the PSR. While Sunny did make false statements with respect to the operations and construction of the hotels in order to inflate their perceived value, it turned out that the hotels and their operations easily supported (and indeed exceeded) the value of the loans. Substitute financing was acquired by Nanak Hotels after Sunny sold his interest, and the Chittenden Bank was paid in fit!! (including substantial extra fees and interest). Accordingly, there no loss, and the adjusted offense level is 6. "

This submission ignores the fact that the only reason that substitute financing was acquired by the Vermont Hotels (the Nanak Hotels) after Nagra sold his interest and the Chittenden Bank was paid in full (including substantial extra fees and interest) was because from December 7, 2007 to December 14, 2007 Kiran advanced over $1,700,000.00 to the Vermont Hotels to cover the shortfall and Kiran and I agreed to personally guarantee to the debts of the Vermont Hotels to the BLVNM. In respect of the Nagra Note on page 4 of the Nagra Sentencing Memorandum Nagra pleads that it is "unknown whether he will ever be paid on this note, or if so, in what amount or when " in support of this plea for a lesser sentence:

"The PSR erroneously states that Sunny has equity in the Nanak Hotel Group wroth [sic] $3,500.000 (PSR 75. This is not correct. Sunny sold his entire interest in the hotel to his partner, Verinder Malhotra, in November 2007. (PSR 71) Sunny now has only a future interest in a promissory note. This note is unsecured (not secured, as the PSR states in 1 76). No payments have yet been made to Sunny on this note, although the first payment was due in December 2008. It is unknown whether he will ever be paid on this note, or if so, in what

amount of when. Sunny's net cash flow is negative, and without payments on the note, his net worth is negative as well. He has no current way to pay a fine.

Attached hereto and marked as Exhibit "CC" to this my Affidavit is a copy of the Nagra Sentencing Memorandum.

45. The value of the Nagra Note became an issue at the sentencing hearing. Apparently, under the sentencing guidelines, if Nagra had been able to collect on the Nagra Note, his sentence would have been harsher. Nagra requested that Nostrand testify on Nagra's behalf at the sentencing hearing to the effect that the Governing Agreement was in effect and that, as a result, there was nothing payable under the Nagra Note. With my permission Nostrand did so Nostrand notes in paragraph 36 of the Nostrand Affidavit:

"Nagra did however significantly benefit from making and abiding by the terms of the Governing Agreement. As I advised his criminal counsel on several occasions because of what had occurred, all of the banks were fully repaid and as a result Nagra should receive a lesser sentence than would have otherwise been the case. That is exactly what occurred.

46. Certain portions of the Sentencing Transcript are relevant. At page 5 lines 8 through 12 of the Sentencing Transcript Ms. Shelkrot (Nagra's criminal lawyer) states:

"it appears that there may be a factual dispute about my client's assets, about the nature of the interest that he still holds or doesn't hold in the business, and whether-what kind of a note he has for the-due to him from Dr. Malhotra. "

The Court notes at the bottom of page 13, top of page 14:

"so when he sold out his interest, he has got apparently a note in his name. Someone's supposed to be paying him something. It's unsecured. You don 't know if he is going to be paid or not. And that, you know, seems a little unusual for a person who is quite sophisticated in business world-in business. And I am not exactly sure how this transpired.

He has not-I mean, somebody owes him money from somewhere on an unsecured note, and so just tell me-tell me how that works. "

Ms. Shelkrot responds by noting that it was Attorney Nostrand who represented Dr. Malhotra "so he might be in the best position [to describe to the court] exactly how it was that that happened rather than my trying to tell you."

47. Nostrand testified on behalf of Nagra at page 22, lines 8 through 18:

"The Chittenden Bank was paid off completely out of the proceeds of the Bank of Las Vegas loan. The Bank of Las Vegas refinanced the Quality Inn and the Hampton Inn property, and all of the funds to pay off Chittenden came from the proceeds of that refinancing.

Our understanding with Sonny Nagra was that we weren't going to pay him on the unsecured note anything until there was a complete liquidation of the Nanak Hotel properties, including the Vermont properties and the New Hampshire properties. And if there was anything left over, we would pay on the note. "

At page 24 lines 15 through 23, Nostrand continued his testimony on behalf of Nagra:

"Yes, because my assignment on behalf of Dr. Malhotra is to liquidate all of these properties and get as much money back as I can and to pay off all of his debts. He has told me that his understanding with Sonny was that Sonny would facilitate and help in any way that I needed, and so I interface with Sonny on a fairly regular basis on sale of assets, refinancing assets, in order to ultimately get my client out of-out of the ownership of these properties. "

Nostrand continues on page 28 lines 8 through 19:

" ...And so it may be several years, and it may ultimately be that-that Sonny Nagra never gets nothing. The deal we made with him is, "we get our money back; then we pay on your note.""

In response to a question from the Court as to whether Nostrand knew roughly how much money is outstanding, Nostrand responded:

"Well I have a million nine that's still due the Bank of Las Vegas. A million nine fifty. I have probably another million on the other property. So there 's probably-almost $3 million left of debt. "

Nostrand concluded by indicating that "but my gut, and my gut would say that there isn't a lot of equity right now".

Based on the testimony of Nostrand that Nagra would not profit from his crimes (in part by not being able to collect on the Nagra Note) the Court imposed a lenient sentence (a $10,000.00 fine). Attached hereto and marked as Exhibit "DD" to this my Affidavit is a copy of the Sentencing Transcript.

48. Based on the Governing Agreement and the events that took place thereafter, I do not owe any money to Nagra on the Nagra Note as the Governing Agreement superseded all other written Agreements of Purchase and Sale and Promissory Notes (including the Nagra Note) and the Nagra Claim should be expunged in full save and except for the

$85,000.00 Cost Award. In this regard, I note that the Trustee already paid Nagra a dividend of $75,486.33.”

Cross-Examination Evidence of the Bankrupt:

[67] At the Bankrupt’s 2021 Examination the Bankrupt was extensively examined by Laan.

[68] The Premise of what Laan was attempting to prove was that the Statement of Defence and affidavits filed by the Bankrupt in the Brampton Collection Action, leading up to the hearing before

K.L. Campbell, J., did not mention the Governing Agreement allegedly reached at the meeting held on December 11, 2007 with Nagra, Kiran, Nostrand, Airi and the Bankrupt attending by phone, mentioning instead an alleged prior agreement reached on November 24, 2007.

[69] I note that, again, Laan attempted to introduce materials that comprised Nagra’s materials struck by AJ Jean as upheld by Conway, J. in the Conway, J. Reasons, including affidavits filed by Nagra in the Brampton Collection Action, as Exhibits to the Bankrupt’s 2021 Examination on the basis that could be used to “test the credibility” of the Bankrupt’s evidence, but these attempts were refused by Gertler at the Bankrupt’s 2021 Examination. No Order of the Court was obtained by Nagra overturning these refusals.

[70] These refused documents were not introduced as exhibits on this Motion in the “Exhibit Brief” filed by Nagra on this Motion, and were therefore not considered by me on this Motion.

[71] The relevant testimony of the Bankrupt was:

“39 Q. All right. So my question to you was I am suggesting to you that nowhere in your affidavit of February 13, 2019 do you reference an agreement that allegedly happened on November 24, 2007?

A. Well, when you have this agreement we reached between me and Sonny and I put that out in the -- in my e-mail to Sonny Nagra and later on because this -- all these agreements were superceded by the governing agreement and that is probably the reason they didn't put it -- we didn't put it.

40 Q. Well, we're not here to speculate. The answer to my question appears to be you did not refer to this agreement in your affidavit of February 13, 2019, correct?

A. That's right, sir.

41 Q. If we now flip back to the statement of defence and if you could take your time, it's a short document, take a look through that document and tell me whether you mention anywhere this alleged agreement of December 11th, 2007 in that document?

A. Because this agreement was rearranged and superceded by the governing agreement on –

42 Q. No. Please take your time and read the statement of defence first, please?

A. You want me to read the –

43 Q. This is at page 57 of your motion record.

A. Okay. Can I go now? Can I start?

44 Q. Yes. Have you read that document?

A. Yes. I did read this.

MR. GERTLER: Let him ask the question.

THE DEPONENT: Go ahead and ask me the question, please.

BY MR. LAAN: 45 Q. You'll agree with me that nowhere in this document is there mention of the alleged December 11th, 2007 agreement?

A. The only thing I can say is I told Howard Reininger about the whole situation, what happened, what transpired. I even gave him the copy of the George Nostrand's testimony in the -- at the sentencing hearing and I guess he didn't listen to me and that's why I fired him.

46 Q. What, therefore is, the answer to my question?

A. My question to the answer is there is no -- there is no mention of this agreement even though I told Howard Reininger that the whole -- whole stuff, gave him all the stuff including the copy of the George Nostrand's testimony at the Nagra's sentencing hearing. So why he did not listen to me I have no clue but that was one of the reasons -- that was two reasons but one reason was this. That's why I fired him, Howard Reininger because he will not listen properly.

[examination relating to February 2, 2011 Affidavit sworn by the Bankrupt in the Brampton Collection Action]

64 Q. To summarize this was an affidavit that you swore in the collection action to address the issue of the proper forum for the litigation be it Vermont or Ontario; is that correct?

A. That's right, sir.

65 Q. So if you would flip to paragraph of this document?

A. That's right, sir.

99 Q. At page 97; do you see that?

A. Yeah. That's right.

67 Q. You state in that paragraph, "Upon obtaining this information I contacted the plaintiff and a new arrangement was negotiated for payment which I confirmed in writing on November 24, 2007 which provided that payment to the plaintiff would only be made from proceeds arising out of the sale of two real estate properties known as the Keene project and Killington project now shown to me and marked as Exhibit G, to this, my affidavit is a true copy of my e-mail to the plaintiff on November 24, 2007 confirming the new payment arrangements." Do you read that?

A. Yeah. That's right, sir.

68 Q. Did you read that at the time?

A. I don't recall that, sir.

69 Q. But you did swear this affidavit?

A. Yes. I did.

70 Q. And if you could look at the affidavit in its entirety and please confirm to me that nowhere in this affidavit is there a mention of the alleged governing agreement of December 11, 2007?

A. I blame it on Howard Reininger even though – 71 Q. Sorry. Just a minute. I hear echoes –

A. -- I had given a copy of the transcript of –

72 Q. Dr. Malhotra, I can't hear you. Stop for a minute.

A. Can you hear me now? 73 Q. I can hear you now.

A. Okay. I blame it on Howard Reininger.

A. I could blame it on Howard Reininger even though I have given him the copy of the transcript of George Nostrand's affidavit in Nagra's sentencing hearing.

76 Q. Once again I caution you. I haven't asked you about whether you are to blame Howard Reininger or not. I'm asking you –

A. Well, that's why I fired him. I'm just letting you know.

79 Q. Just stop it. So what is the answer to my question? Nowhere in this affidavit is there a mention of a December 11, 2007 governing agreement; is that correct?

A. That is correct because –

[examination relating to April 11, 2011 Affidavit sworn by the Bankrupt in the Brampton Collection Action]

86 Q. And if you could turn to paragraph nine of that affidavit, please, and take a moment to read it and advise me when you've finished?

A. Okay. I've read it.

87 Q. And it states, "The plaintiff further: alleges in paragraph 30 of his affidavit that there was no new arrangement to vary the promissory note as I have alleged in paragraph 14 of my affidavit sworn February 2, 2011." You'll agree with me that we just finished discussing paragraph 14 of your affidavit sworn February 2, 2011, correct?

A. That's right, sir.

88 Q. And you continue to say, "However this variation has been subsequently confirmed by the plaintiff by way of testimony solicited from Mr. George W. Nostrand, my attorney who signed the promissory note." In other words, let me suggest to you that here you are doubling down on the allegation that there was an amendment on November 24, 2007, correct?

A. It's not that, sir. It's December 11. That was the second one was December -- final was December 11th. This is what George Nostrand was saying. It is about December 11, 2007.

Q. You don't say that there. You refer –

A. Well –

90 Q. Just a minute. Don't interrupt me, please. Are we clear? Do not interrupt me, please, okay? Are we okay with that?

MR. GERTLER: Are we okay with what, Mr. Laan?

BY MR. LAAN: 91 Q. So in your affidavit of February 2, 2014 at paragraph 24 you speak about an amendment on November 24, 2007.

MR. GERTLER: Sorry, Mr. Laan, you referred to an affidavit in 2014. BY MR. LAAN: 92 Q. February 2, 2011 –

MR. GERTLER: All right.

BY MR. LAAN: 93 Q. -- you refer to, at paragraph 14, I thought that was what I said, you talk about a new arrangement reached on November 24, 2007 and you do not talk about a new arrangement yet again on December 11th, correct?

A. Are you going on number nine?

MR. GERTLER: No. He's back to the original affidavit. THE DEPONENT: Okay. That was -- yeah. That's right.

BY MR. LAAN: 94 Q. So in your subsequent affidavit two months later you touch upon the issue once again at the paragraph that we looked at and you say at paragraph nine, "However this variation", in other words the variation that you talked about taking place on November 24, 2007, "This variation was subsequently confirmed."

MR. GERTLER: Actually with respect, Mr. Laan, his affidavit does not say that. You're now reading into it.

BY MR. LAAN: 95 Q. That's exactly what it says. It says -- MR. GERTLER: No. It does not, Mr. Laan.

96 Q. -- "However this variation has been subsequently confirmed by the plaintiff" and by this variation you mean the variation set out in paragraph 14 of your affidavit of February 2, 2011, correct?

A. Mr. Laan, you're asking me to read page 110 and subsection is nine? 97 Q. Correct, yes. And I want you to read –

A. And you're talking about something else.

98 Q. I want you to read that in conjunction with paragraph 14 and answer this question. It's not a difficult question. The question is when you say, "However this variation has been subsequently confirmed" when you say this variation clearly you must be referring to the variation set out in paragraph 14 of the previous affidavit; isn't that correct?

A. No, sir. Your assumption is wrong.

99 Q. I see. And what am I to understand from this sentence?

A. Well, when you talk about George Nostrand he is talking about governing agreement of December, sorry, 11, 2007.

[Examination with respect to an April 11, 2011 Affidavit and Second Supplementary Affidavit of the Bankrupt sworn July 11, 2011 of the Bankrupt filed in the Brampton Collection Action]

109 Q. So at paragraph 60 will you agree with me that you swear to the alleged amendment to the agreement of purchase and sale on November 24, 2007?

A. That's right, sir.

110 Q. And if you read this does that conform to your understanding of what this agreement was?

A. Yes. That's right, sir. At that time.

111 Q. What do you mean by the phrase 'at that time' ?

A. As that of November 24, 2007 after I found out that, you know, he has -- after while he was going out that, you know, he has -- after his -- while he going through the criminal proceedings Sonny Nagra again defrauded another bank of CIT. At that time after that this came into effect. This was then made. This arrangement was made.

112 Q. You'll agree with me that if you could look at paragraph 61, short paragraph, "Nagra agreed on various occasions to all of the foregoing"?

A. Yes. That's right.

113 Q. How did he agree? Did he agree in writing?

A. To my recollection what we had after the governing agreement on December 11th, 2007 he was supposed to be cooperating with us in selling the hotels. He did that. Second thing was at that time when we made the agreement my wife was supposed to fund another

$450,000. That was done. After that all the hotels were sold. After that I didn't get my 1.975 million dollars. Also after the agreement he -- Sonny Nagra benefited from this agreement because of the December 11 agreement by helping him in reducing the sentence and George Nostrand went in and help him and discussed about the governing agreement and that's why; to get a lighter sentence.

114 Q. That's very interesting but what now is the answer to my question?

115 Q. Was this agreement committed to writing? You say that he agreed on various occasions. I asked you a very simple question. Did he agree –

A. That is -- what that means is he was -- I'm referring to December 11 of 2007 after governing agreement and that is what he agreed on various occasions on all the foregoing.

116 Q. Still what is the answer to my question? Did he agree in writing?

A. No, sir.

117 Q. Thank you.

A. But actually –

122 Q. Excellent. Thank you. Have you had an opportunity now to read the second supplementary affidavit?

A. Yes, sir.

123 Q. Thank you for that. I know it's a long document. And that was sworn on July 18, 2011, correct? And we spoke about paragraph 60 and 61 and I –

A. That's correct.

124 Q. -- asked you to confirm for me that nowhere in this document is the alleged governing agreement of December 11, 2007 mentioned?

A. In this is clearly -- the terms of the agreement is clearly stated there. MR. GERTLER: You're referring to paragraph 65?

THE DEPONENT: Paragraph 65.

125 Q. All right. Let's read this carefully together. "The agreement of purchase and sale was to be renegotiated on the following terms" and then it 16 continues with A, B and C. You'll agree with me that the date of December 11, 2007 was not mentioned in this paragraph or any other paragraph?

A. To me it's very obvious because – 126 Q. Please answer my question.

A. -- before the event on to -- well, this is evident. I think it's pretty evident there is a mention of the agreement.

127 Q. Please listen carefully to my question. The alleged governing agreement of December 11, 2007 is not mentioned in this document, correct?

A. I guess the contents are there.

129 Q. Thank you. You'll agree with me that, whatever the context, the December 11, 2007 alleged governing agreement is not explicitly mentioned in this paragraph or any other paragraph of this document?

A. The date is not mentioned but there is Nostrand negotiated a deal between Nagra and I would sell all the properties at the time the closing was been forwarded to the lawyers. It was too late but this is would sell all the properties. This is he's referring to the governing agreement of December 11, 2007.

130 Q. What you do in this affidavit, if you look at some of these paragraphs, paragraph 60 talks about what happened on November 24 and then –

135 Q. Just a minute, please. You were garbled there. I wonder if you could start that answer from the beginning?

A. Okay. Before he went for this testimony he told me that he was asked by Sonny's criminal lawyer and Sonny to come and testify before the court in regards to the governing agreement and he asked my permission also before he went and said something in the court.

136 Q. And I said that we'd be dealing specifically with what he said in the court later on. So I'm asking you simply to follow the chronology. So in paragraph 64 you talk about events that took place on December 15, 2007, correct?

A. This is should be before the document. If you read between -- on 63 between December 6th and 15, "As a result of my lawyer's due diligence prior to the closing agreement of purchase and sale I discovered there was approximately 1.5 million dollars excluding the principle and interest owed by Dr. Limon's mortgage more particularly described below as undisclosed loans, liens and payables."

137 Q. Yes. That's what it says but you didn't see fit, did you, to address, in paragraph 63 would have been a good place to do it, to discuss the meeting of minds as you've alleged it to be on the governing agreement. You didn't put it in there?

MR. GERTLER: Mr. Laan, Dr. Malhotra's already testified that paragraph 65 represents the December 11th agreement.

BY MR. LAAN: 138 Q. And if we could go to paragraph 65 then your language is very specific. You say the agreement of purchase and sale was to be renegotiated. You don't say that it was renegotiated. You say that it was to be renegotiated?

A. Well, you can go after for this wording but the gist of the conversation here is this is what exactly happened and the way it was put in may be not right but this is the gist of the conversation where he went and George Nostrand went in and testified in the court because he specifically asking me whether we can discuss governing agreement.

139 Q. Sir, this is your affidavit. You're responsible for it. And in the affidavit you said the agreement of purchase and sale was to be renegotiated –

A. Well, I think that is –

140 Q. Excuse me. I haven't finished asking my question, okay? Was to be renegotiated, correct?

A. Yeah. Part of my –

141 Q. You read that before you signed?

A. Pardon my English.

142 Q. Pardon?

A. Pardon my English.

149 Q. If you could now go to page 138 of the brief and paragraph 81 if you could read that to yourself? Let me know when you've finished.

A. I finished it, yeah.

150 Q. So I'm going to zoom right now to subparagraph E. "Upon learning of these misrepresentations I negotiated an amendment to the agreement of purchase and sale which was confirmed in writing by Nagra." Do you see that?

A. That's right, sir.

151 Q. Then you turn the page at F it states, "The amendment stated that Nagra would only be paid from the proceeds arising out of the sale of two properties." Do you see that?

A. That's right, sir. That's right, sir. 152 Q. That evidence is correct?

A. That evidence is correct. 153 Q. And –

A. If I may add?

154 Q. Certainly.

A. This is talking about the November 24 after I found that he took -- defrauded CIT particularly after that.

155 Q. Correct. You're referring specifically in this paragraph once again to the November 24, 2007 alleged amendment, correct?

A. Yeah. That's right.

[Examination on Supplementary Affidavit dated November 30. 2011 sworn by the Bankrupt in the Brampton Collection Action]

161 Q. And paragraph 38 states, "Not only was I never charged with any criminal offence I was not even questioned by the FBI in regard to such frauds even though the FBI had conducted a thorough investigation which included interviewing numerous hotel employees." So were you, at any time, in Vermont during the period of time from December of 2007 forward?

A. I don't recall it, sir. I never used to visit before not so much. 162 Q. I beg your pardon? Sorry.

A. I was just a passive investor.

163 Q. That doesn't answer my question.

A. Okay. I don't recall it, sir.

164 Q. Thanks. And you didn't come down to Vermont for the closings on December 14 or 15 or 18 whenever those took place, did you?

A. I don't recall, sir.

167 Q. When was Howard Reininger your lawyer? From what period of time to what period of time?

A. I think -- I think I fired him in the first week of June of 2011.

[Referring to the Nostrand Affidavit at Exhibit R to the Bankrupt’s Affidavit] 172 Q. Right. And is this the affidavit that you gave to Mr. Reininger?

A. I told you this is -- this is way later.

173 Q. Correct. This is way later so –

A. Yes.

174 Q. -- in fact this affidavit didn't come to light until the mediation of the dispute with Nostrand, right?

A. Well, before that George Nostrand was ready to come and testify in the court in Toronto. But somehow later on my lawyer, Ian, he says, "I think we should get a written affidavit from George Nostrand as well. "

175 Q. So when you testified earlier today that you gave the Nostrand affidavit to Mr. Reininger you must be mistaken, correct?

MR. GERTLER: Excuse me, Mr. Laan, I do not recall any such testimony. BY MR. LAAN:

176 Q. You said that you instructed Mr. Reininger in part by giving him an affidavit from Nostrand?

MR. GERTLER: That's not what he said, Mr. Laan.

177 Q. So by the time you swore your November 30, 2011 affidavit, the third supplementary affidavit, had you moved on to new lawyers?

A. That's right. 178 Pardon?

A. That's right, sir.

179 Q. Who are the new lawyers?

A. Ian Roher.

180 Q. Roher? A. Yes.

181 Q. Was Mr. Roher the person who prepared, with your assistance, the third supplementary affidavit?

A. I guess so.

184 Q. By the way did you ever sue Mr. Reininger for not following your instructions or for negligence generally?

A. No, sir.

186 Q. So your new lawyers and you in putting together the third supplementary affidavit did not reference the alleged meeting of December 11, 2007 or the governing agreement; is that correct?

A. That's right, sir.

[Examination with respect to Affidavit of Thomas Carlson, former US counsel to Nagra in the negotiation of the Share Purchase Agreement sworn in the Brampton Collection Action]

193 Q. If you could, please, go to page 254? Well, let's first go to page 224 if you don't mind. MR.

GERTLER: Again, Mr. Laan, this is an affidavit of Mr. Carlson that my client does not recall.

BY MR. LAAN: 194 Q. Well, at page 224 there is an e-mail sent by you, it appears, Dr. Malhotra, to Sonny; do you see that?

A. That's right, sir.

195 Q. And in this you say, "Further to our discussions this is the deal we have concluded and is as follows"; do you see that?

A. That's right, sir.

196 Q. That very e-mail is the basis for you saying that we made an amendment on November 24, 2007, correct?

A. No. This -- this, the final amendment, was made when we had the governing agreement for on December 11. This was one of the basis for that.

197 Q. I'm talking about you have said in at least three separate affidavits that the amendments took place on November 24. So I'm restricting myself now to the November 24 amendment. So this was the amendment that---

[sound cuts and Zoom froze]

THE DEPONENT: First amendment was done according to me and me and Sonny we discussed it after I found out that criminal proceedings were going on. He again defrauded CIT Bank. At that time this came into effect but later on -- that's what it covered and then that was the December 11th, 2007 came into effect.

[Examination with respect to Third Supplementary Affidavit of the Bankrupt dated November 30, 2011 sworn in the Brampton Collection Action]

204 Q. This is not an issue which is reserved for today. I've never been able to keep track of exhibits and I do need a babysitter. So if we could mark the e-mail dated November 24, 2007 sent at 9:20 a.m. from Verinder Malhotra to Sonny Nagra and Andrew Patel, P-a-t-e- 1, as Exhibit 6? So does this, as far as you're concerned, memorialize the agreement reached on that day?

A. This is the e-mail I sent to Sonny Nagra and this is the first -- so as far as I'm concerned this is the main event happened after we discovered that Sonny Nagra again during the criminal proceedings also defrauded CIT Bank. This was on -- this agreement was on November 24th when we learned later on there are so many debts in there. After that we made the final and the governing agreement on December 11th, 2007.

EXHIBIT NO. 6: November 24, 2007 e-mail from Malhotra to Nagra and Patel

205 Q. I've heard you say that before but it was a simple question. Does this memorialize the agreement reached on November 24?

MR. GERTLER: He's already answered the question, Mr. Laan.

210 Q. My question is if you look at paragraph 17 of this affidavit do you agree that the November 24 proposal was rejected twice by Sonny Nagra shortly after November 24, 2007?

A. I don't recall, sir.

211 Q. All right. We'll deal with that after the break. And at page 260 there is a fax transmission from Nostrand's office that is addressed to Anthony Patel and you and various others including Tom Carlson, the lawyer Sonny. Do you see that?

A. That's right, sir.

212 Q. This is noted as being the final agreement, correct?

A. No. There is another agreement because we found out on December 10 and December 11 there are a lot more outstanding debts and then we refused to go ahead and do the closing and at that time there was an agreement that is the governing agreement in George Nostrand's office.

213 Q. So I misspoke. It says that it's an executed purchase and sale agreement, correct? 23 A. That's right.

214 Q. And this was signed it was still dated November 19, 2007 but it was, in fact, signed on December 10; isn't that correct?

A. It looks like that.

215 Q. And at page 263 there appears some signatures and you signed by your attorney under power of attorney who is George W. Nostrand, correct?

A. That's right, sir.

216 Q. And so this reflected the agreement as at that date. Never mind what happened after but as at December 10, 2007 that represented the agreement?

A. And if you see it on the first page, 260, Nagra the third and hopefully the final round. Hopefully the third -- final round but it was not the final round.

217 Q. Where do you see that, sir?

A. It is right on the front page of fax transmission. Page 260 written by somebody; Nagra the third and hopefully final round. And this was not the final round.

218 Q. Is this your handwriting?

A. Absolutely not.

219 Q. Do you know whose handwriting it is?

A. I have no idea. This is what he gave it to us.

220 Q. So this agreement, you'll agree with me, does not say that Nagra only gets paid upon the sale of two properties. It doesn't say that anywhere, does it?

A. No, sir.

221 Q. All right. So the deal that you thought you had on November 24, 2007 did not find it's way into the document of December 10, 2007. Is that fair to say?

A. That's right, sir.

[Examination on Airi Affidavits filed on this Motion- meeting of December 11, 2007]

370 Q. And conspicuous by his absence is Mr. Carlson, Sonny's lawyer; is that correct?

A. That's right, sir.

371 Q. He was not at the meeting, correct?

A. That's right, sir.

372 Q. And he was involved actively up until that point, wasn't he?

A. I don't -- I don't know, sir.

373 Q. Well, we can go through it but Sonny was negotiating through Mr. Carlson; was he not?

A. He was but December 11 when my wife said, "We are not going to close the deal" he called me in the morning of December 11 but I was with my patients. I said, "Okay. Call me at lunchtime." At that time he was more concerned about his criminal convictions there and he wanted something done at that time. It was his suggestion at that time when he called me that why don't we go to the same -- make the basis of my November 24, 2007 agreement based on, like, similar kind of things. He suggested this agreement at lunchtime and then -- because he was very concerned that if he doesn't -- if we don't close the deal he is going to serve a much longer sentence. So at that time I talked to my wife. I said, "Please arrange the meeting with Mr. George Nostrand later on the evening." And also at that time Nagra said we -- could you let me explain it to George Nostrand; that's how it started everything.

374 Q. So this is on what day?

A. The same -- that was on the December 11, 2007.

375 Q. So noon on that day is when you were talking about the new deal?

A. Yes.

376 Q. And yet if you go to the your Exhibit Q it wasn't until 4:44 p.m. on that day that Danielle Fogarty advised you of these new liabilities?

377 Q. Would you point me to that e-mail? A. I don't recall it. I don't have it here now but there was an e-mail in the morning of -- December 11 as well but we were not going to do that and then after we got the e-mail from Danielle my wife again said, "I am not going to do it" again. That precipitated the whole thing.

378 Q. Sir, you're quite right. There is an e-mail. If you flip a couple of pages over there is an e-mail that's December 11, 2007 sent at 11:06:58 a.m. Do you see that?

379 Q. So there you're advised by Danielle Fogarty of a writ in the amount of $105,000. So at that time that's all that you and Kiran had knowledge of; isn't that correct?

A. No. No. No. No. We came to know about, through Shashi Airi on December 10, that there is a lot of outstanding debts and when we found out my wife, Kiran confronted Sonny Nagra and he kept saying, you know, "We have to close the deal number one and number two there is enough equity in the -- in the properties and we should be able to pull out of this mess without any problem." This is he kept on saying but my wife was, Kiran was so adamant that we are not going to close this. When he broke -- she broke the news to Sonny Nagra and that's what shit hit the fan; excuse my -- my wording.

[Attempt by Nagra to elicit evidence that the Bankrupt was a criminal co-conspirator with Nagra]

BY MR. LAAN:

500 Q. Were you present when Nagra and Singh discussed with you how Barrett had agreed to the deposit exchange arrangement?

MR. GERTLER: Were you involved in such a discussion? THE DEPONENT: Absolutely not, sir.

BY MR. LAAN: 501 Q. So Barrett is lying?

A. I'm not -- I don't know what he's saying: but definitely I had invested way more than my share in there so I don't have to get involved in these kind of criminal activities.

502 Q. During the meeting did you thank Barrett for participating in the act of freeing up equity in the project so that you could work on other projects?

MR. GERTLER: Mr. Laan, he just said he wasn't at the meeting.

BY MR. LAAN: 503 Q. Do you recall such a comment made by you to Barrett at any time? MR. LAAN: All right. I'm going to mark this as an exhibit for identification purposes.

MR. GERTLER: No. You're not. You're not marking that Barrett examination. MR. LAAN: That will be Exhibit B.

MR. GERTLER: You're doing so against my wishes, sir. I do not want you to mark that as an exhibit to these proceedings. They are not before these proceedings and they should not be before these proceedings.

MR. LAAN: I guess I'm doing it against your counsel but I'm doing it nonetheless. So the letter dated January 16, 2009 together with the attachment which is the redacted report of

an interview with Michael Barrett from the U.S. Department of Justice will be Exhibit B for identification purposes.

MR. GERTLER: And I reserve the right to bring to have it removed from the record.

EXHIBIT B: Letter dated January 16, 2009 with redacted report of interview with Michael Barrett attached.”

[72] Whatever this document was, it was not introduced as an exhibit on this Motion. I will have more to say regarding this attempt and a similar attempt involving the Cross-Examination of Kiran later in these reasons.

[73] The Bankrupt’s Cross-Examination continued:

“511 Q. Now, at paragraph you say, "Nagra had to be removed as a principal from the Vermont hotels' corporate structure. The Vermont hotels' lawyer was Nostrand. However, Nagra agreed that Nostrand could act for me personally in buying out Nagra's interest", and there you say, "in order to placate the banks." In order to placate the banks seemed to be an odd expression in this situation. Are you suggesting that you gave a contract on what was it? December 10. An agreement on December 10, 2007 to the banks and that you had, in fact, a different arrangement going with Nagra?

A. I don't recall it, sir.

512 Q. What do you mean when you say, "In order to placate the banks"?

A. I think the banks didn't want to have any anything to do with Sonny Nagra at the time.

513 Q. I appreciate that but in other words is all you're saying that all the bank were concerned about was that he be out?

A. Yeah. That's right, sir.

514 Q. And you understood that you'd have to pay to get him out?

A. That's what -- I guess so.

515 Q. That's what the agreement that was sent on December 10 said, correct?

A. I guess so.

516 Q. So on December 11, 2007 did you participate in the entire meeting that was held at Nostrand's office?

A. That's true, sir.

517 Q. So it was on a different day that you were looking after patients during that period of time?

A. No. I finish my office at five and that's why I asked him -- asked Kiran to arrange a meeting later on; later that afternoon after five.”

[74] The Cross-Examination adjourned and continued on August 11, 2021, but for whatever reasons the questions restarted at 1, rather than continuing from Q.559 on July 28, 2021. The Bankrupt’s relevant testimony on that date was:

[relating to a Nostrand email from Nostrand dated December 27, 2007 to a George Hewitt that appears not to be contained in any of the materials on this Motion despite being extensively quoted in the Factum filed by Nagra, improperly]

“27. Q. And were the properties transferred to you by an agreement with an effective date of November 19th, 2007?

A. You keep repeating the same thing. Yes, it was there. Initially there was a document signed but then it was again, we had an agreement with Sunny Nagra on the 24th of November after he fraudulently transferred some funds from CIT and after that when we found out more documents, my wife came back from India in the first week of December and then I told her to look into those properties, and then she found out on December 10th, a lot of discrepancies. And then again, we had another agreement on December 11, governing agreement.”

[75] For the sake of context the allegation by the Bankrupt that Nagra “fraudulently transferred some funds from CIT” stated in various formulations throughout the Bankrupt’s cross-examination relates to the following statement made in the Bankrupt’s Affidavit at paragraph 22(g):

“After Nagra was charged with conspiracy to defraud and employing illegal aliens, etc. and was released on bail, Nagra falsified a $125,000.00 construction financing invoice on the Keene New Hampshire project to CIT and received $125,000.00. These funds were not deposited to the Vermont Hotels. Attached hereto as Exhibit "M" to this my Affidavit is a copy of the (i) November 14, 2007 letter from Elizabeth Sackett, the lawyer for CIT to Nostrand; (ii) her November 16, 2007 email to Nostrand; and (iii) her subsequent November 16, 2007 letter to Nostrand, Paragraph 3 on page 2 relates to the $125,000.00 payment in question. At the request of Nostrand, the November 16, 2007 letter revised paragraph 3 from the November 14, 2007 letter to change the reference from "Nagra fraudulently negotiated” to “Nagra inappropriately negotiated”. This amount was repaid through the BLVNM financing referred to herein.”

[76] In the November 14, 2007 letter to Nostrand at Exhibit M to the Bankrupt’s Affidavit, counsel for CIT alleges and demands this transfer be remedied in exchange for forbearance from CIT enforcing its rights under its security:

“4. Mr. Nagra and/or Mr. Malhotra and/or Guru Nanak Hotels, d/b/a Hampton Inn, Keene agree to pay CIT's attorneys' fees and costs associated with the default of the above- referenced Loans, including, but not limited to, CIT's efforts to retrieve the $125,000 that Mr. Nagra appears to have fraudulently negotiated. These fees and costs are collectible under Article VI of the Construction Loan; …”

[77] Also, given the repetitive focus on the premise of Nagra that the apparent failure by prior counsel for the Bankrupt to mention the Governing Agreement in pleadings and affidavits filed in the Brampton Collection Action, mostly in 2011, suggested that the Governing Agreement and did not exist, I find it instructive that of the approximately 786 questions asked in the Cross- Examination of the Bankrupt by Laan, that there would be at least one question asked about the following statement made by the Bankrupt in the excerpt of the Mediation Brief of the Bankrupt, filed for a Mediation held in the Brampton Collection Action in January 31, 2013 at Exhibit “C” to the Bankrupt’s Affidavit.

[78] That document stated:

“115. As set out below, the Governing Agreement, which replaced and superseded all the terms of the Purchase Agreement and Note, was entered into on December 11, 2007.

Undisclosed Debts &Liabilities on Hotel Properties Discovered Prior to Bank Refinancing

116. The refinancing transaction with the Bank of LVNM was scheduled to close on December 14, 2007.

117. On December 10 and 11, 2007, Danielle Fogarty ("Fogarty"), the lawyer acting for Malhotra in regard to the refinancing closing, discovered various large outstanding liens (totalling approximately $1,600,000.00) registered on title to some of the Hotel Properties, including two writs of attachment and an undisclosed debt owed to Limon.

Emails between Danielle Fogarty and George Nostrand, Verinder Malhotra and Kiran and attached Receipt of Writ are attached at Exhibit 17

118. The largest of these undisclosed debts, in the claimed amount of $1,500,000.00 was reflected in a lien registered by AKAL on the Keene Property, the creditor to which Malhotra had wire transferred $600,000.00 in October 2007 and which Nagra advised was fully paid.

119. None of these debts had been disclosed by Nagra on the Exhibit A. In fact, as set out above, Exhibit A disclosed minimal liabilities or debts, exclusive of the Bank of LVNM refinancing debt.

120. On December 10, 2007, Kiran travelled to Boston, and thereafter to Vermont, to meet with Nagra about the undisclosed debts.

121. At this time, she was told by Airi, that the situation was much graver than even Fogarty had - learned. Airi advised Kiran that, in addition to the amounts that she had recently learned about, there was close to an additional million dollars of debt relating to various unpaid supplier invoices, Vermont State Room and Meals, and various city taxes owed by Quality Inn and the Killington Property.

122. According to Nostrand, Malhotra was "blindsided" upon learning of the foregoing undisclosed debts and was not prepared to close the Bank of LVNM transaction.

Purchase Agreement and Note Renegotiated - Governing Agreement Reached

123. An urgent meeting took place on the evening of December 11, 2007 at Nostrand's office with Kiran, Airi, Nostrand and Nagra. Malhotra took part in the meeting by telephone.

124. At this meeting the terms of the Purchase Agreement and Note were revised on the following terms (previously referred to as the "Governing Agreement"):

a. Nagra would assist Malhotra in selling the Hotel Properties;

b. After paying all of the debts on the Hotel Properties, whatever funds remained would be used to pay back Malhotra's excess investments, which at the time, Nagra had been valued at $1,975, 000.00; and

c. Nagra would be paid on the Note, if and only if, after selling the Hotel Properties, satisfying all bank and other debts and repaying Malhotra's excess investment, any additional monies remained. In that case, such excess would be split between Malhotra and Nagra.

125. As noted herein, the new agreement was to be the Governing Agreement and was to supersede all written agreements previously executed.

126. Unfortunately, and notwithstanding the presence of counsel, the Governing Agreement way never reduced to writing. However, Nostrand has testified under oath, both in 2009 when called as a witness by Nagra's criminal counsel at Nagra's sentencing hearing, and again in 2013, that the Governing Agreement was made and agreed upon by all parties.

A copy of the transcript of Nostrand's testimony given at Nagra's sentencing hearing is attached as Exhibit 18

127. Normally, in circumstances of this kind, Malhotra would have simply refused to close, even given the threats, intimidation, extortion and possible adverse consequences that might follow.

128. However, by December 10, 2007, Malhotra had already advanced $1, 272,553.00 by way of wire transfers to Fogarty's Interest on Lawyer Trust Account ("IOLTA") for the closing of the refinancing deal with the Bank of LVNM.

A copy of the IOLTA is attached at Exhibit 19

129. After the Hotel Properties were sold, there were no monies left to repay anything even to Malhotra, let alone to pay Nagra anything.

A copy of the seller's Closing Statement for Hampton-Brattleboro, VT is attached at Exhibit 20

A copy of the closing statement for Quality Inn is attached at Exhibit 21

The Settlement Statement for the sale of the Keene Property is attached at Exhibit 22 The closing statement for Killington is attached at Exhibit 23

130. Moreover, Malhotra, either directly, or by assuming liability for the new financing in order to pay existing debts, including those of CIT and Chittenden Bank, paid

$1,722,523.20 of his own funds to pay off the debts.

Nagra Complies with Governing Agreement and Assists in Sale of Hotel Properties

131. Nagra assisted in the sale of the Hotel Properties and, not once, in the months and years after the Governing Agreement was entered into, did Nagra ever request any payment on the Note.

132. Any assertion that Nagra was unaware of the sale of the various Hotel Properties is wholly untenable, as during this period he worked with both Nostrand and Malhotra in order to effect such sales.

133. Moreover, the first indication that Nagra would be asserting a claim under the Note was when the Statement of Claim in this action was issue in November 2010, notwithstanding that no payments had been made by Malhotra on December 1, 2008 or December 1, 2009, as required under the terms of the Note purportedly agreed upon.

134. In fact, until this action was commenced 3 years later, Nagra never asked Malhotra or Nostrand about whether he would be paid any monies, never made any demand for such monies and never asserted that Malhotra had failed to make payments due and owing pursuant to the Note's terms.

135. In fact, Nagra's conduct was wholly consistent with the terms of the Governing Agreement made December 11, 2007, and not the Purchase Agreement and Note finalized the day before.

136. Nostrand's affidavit, attached at Tab 1, also confirms all of the foregoing.”

[79] So whatever were the alleged shortcomings of Reininger’s representation in 2011, it appears by January of 2013 Teplitsky Colson and Ian Roher (“Roher”) had remedied those shortcomings by obtaining the Nostrand Affidavit, relied on for the above statements in the Mediation Brief, allegedly confirming the existence of the Governing Agreement, and the Bankrupt was relying on the existence of the Governing Agreement, as supported by the Evidence of Nostrand, as a defence to the enforceability of the Promissory Note by Nagra in the Brampton Collection Action.

[80] I will deal with Nostrand’s testimony, both at the Bankrupt’s Sentencing hearing on May 7, 2009 and again in the Nostrand Affidavit sworn in the Brampton Collection Action in 2013, separately below.”

Evidence of Kiran

[81] The Kiran Affidavit sworn on affidavit on February 13, 2019 supporting the position of the Bankrupt on this Motion is at Tab 3 to the Bankrupt’s Motion Record.

[82] In the Kiran Affidavit, Kiran states:

“4. Verinder and I became aware of serious problems with the Vermont Hotels in October 2007 when Verinder's partner, Nagra was charged with conspiracy and with employing illegal aliens at the Vermont Hotels. As a result of this happening, (1) the Chittenden Bank placed two of the hotels into receivership; (ii) CIT Financial called its loan; and (iii) BLVNM refused to continue with a contemplated financing so long as Nagra was involved in the Vermont Hotels. This placed severe pressure on the Vermont Hotels and on Verinder as the remaining partner. Verinder had also guaranteed the liabilities of the Vermont Hotels to both the Chittenden Bank and to CIT.

5. Attorney Danielle Fogarty ("Fogarty") of the law firm of Donovan & O'Connor acted for the Vermont Hotels, Verinder and me in connection with the BLVNM financing. She advised Verinder and me that advances would be required to satisfy the conditions of the BLVNM financing. I made an advance of $750,000.00 to the Vermont Hotels by providing this amount to Fogarty's office in trust on December 7, 2007. I also advanced a further

$500,000.00 to the Vermont Hotels that was received by Fogarty's office in trust on December 10, 2007.

6. On December 10, 2007 I went to Vermont given the upcoming closing of the BLVNM financing. I was met at the airport in Boston by Shashi Airi ("Airi") who was, after Nagra

was charged with conspiracy and employing illegal aliens, the Regional Manager of the Vermont Hotels. In the drive from the airport to the Quality Inn in Brattleboro Vermont Air advised me that the financial position of the Vermont Hotels was worse than we understood to be the case, He asked me if we really wanted to close the deal with Nagra (to purchase Nagra's interest in the Vermont Hotels (given that the agreement of purchase and sale and the promissory note referred to in paragraphs 23 to 25 of Verinder's Affidavit had already been signed).

7. When I got to the Quality Inn in Brattleboro on December 10, 2007, I met with Nagra and with Airi.

8. Nagra did not provide to me the list of the outstanding payables. Rather he stressed to me that there was sufficient value in the Vermont Hotels to ensure that all of the creditors would he paid in full.

9. As set out in paragraph 29 to Verinder's Affidavit, on December 11, 2007 we were advised by Fogarty that there were further substantial undisclosed liabilities of the Vermont Hotels. These further undisclosed liabilities together with Airi's comments to me about the worsening financial position of the Vermont Hotels put into question whether Verinder and I were prepared to complete (i) the Nagra buyout and (ii) the BLVNM financing (given that the BLVNM would require me to make further advances to the Vermont Hotels and would also require personal guarantees from Verinder and me).

10. We met at Nostrand's office late in the afternoon of December 11, 2007. In attendance at that meeting were Nagra, Airi, Nostrand and me. Verinder was in attendance by way of conference call. At that meeting we discussed the non-disclosed liabilities and the worsening financial situation. At this meeting Nagra and Verinder agreed to the Governing Agreement as follows:

(a) Nagra would assist Verinder in selling all of the Hotel Properties;

(b) Out of the proceeds of such sales, all of the Companies' debts would be paid;

(c) After such debts were paid, Verinder would then be paid the sum of $1,975,000 which Nagra had represented reflected the excess amount that Verinder had invested in the Hotel Properties; and

(d) if, and only if, there were any monies remaining after all of the foregoing was completed, would Nagra be paid anything pursuant to the Promissory Note.

11. I was extremely concerned about the financial position of the Vermont Hotels. Not only had I advanced $2,050,000.00 of my own money to the Vermont Hotels since September 2007 on Verinder's behalf, but I was now being told that the financial position of the Vermont Hotels was worse than what had been revealed. However, I did not have any specific information as to how bad the situation was. Further, it was now evident that Nagra

had misstated the extent of the liabilities of the Vermont Hotels in his agreement with Verinder.

12. Attached hereto and marked as Exhibit "B" to this my Affidavit is a copy of the BLVNM financing letter of commitment dated November 5, 2007 (the "BLVNM Commitment"). As may be noted, (i) the BLVNM Commitment (i) included financial covenants that required that the Vermont Hotels satisfy its outstanding liabilities to creditors as part of the financing; and (ii) that Verinder and I were required to personally guarantee the debts of the Vermont Hotels to BI.VNM. The Vermont Hotels did not have the sufficient financial resources to satisfy the outstanding liabilities to creditors. Verinder did not have the financial resources to do so. I had already advanced $1,250,000 to the Vermont Hotels to cover liabilities to creditors. Now I was being asked to personally make the further advances. I was only prepared to do so because Nagra and Verinder had agreed to the Governing Agreement.

13. Relying on the fact that Nagra and Verinder had agreed to the Governing Agreement,

(i) I advanced a further $450,000.00 to Fogarty's office in trust for the Vermont Hotels on December 13 and 14, 2007 as part of the BLVNM financing and (ii) I signed a personal guarantee of the debts of the Vermont Hotels to the BLVNM. Attached hereto and marked as Exhibit "C" to this my Affidavit, is a copy of two of the wire transfers in respect of my

$450,000.00 further advances to the Vermont Hotels.

14. Attached hereto and marked as Exhibit "D" to this my Affidavit is a copy of the Reconciliation of Funds Received and Disbursed into Fogarty's Interest on Lawyers Trust Account (IOLTA) prepared by Fogarty's office in respect of the BLVNM financing. As may be noted from the Reconciliation (3) the BLVNM (and its partner bank the Zion Bank) advanced $7,144,192.00; and (ii) I advanced 51,700,000.00 to the Vermont Hotels. From the loan proceeds (i) Vermont Economic Development Authority ("VEDA") received

$826,233.41; (ii) Chittenden Bank received $6,625;171.00; (iii) CIT received $255,396.00; and (iv) the Receiver received $201,029.00. As a result of the BLVNM financing und my further advances to the Vermont Hotels (i) the Chittenden Bank was repaid and the receivership ended, CIT was paid and VEDA was paid.

15. Both Negra and Nostrand had assured me that there was sufficient value in the Vermont Hotels so that I would recover my advances and that I should not worry.

16. I was involved in the marketing and sale of the Vermont Hotels. Nagra, was also actively involved in the marketing and sale of the Vermont Hotels and conducted himself in a manner consistent with the Governing Agreement.

17. The sale process started in January 2008 and was not completed until January 2011. During this period, I was required to make further advances to the Vermont Hotels to allow the Vermont Hotels to pay its creditors. Attached hereto and marked as Exhibit "E" to this my Affidavit is a summary of the advances I made directly or indirectly to the Vermont Hotels subsequent to December 2007 in the amount of $499,292.00.

18. The economy in Vermont weakened in 2008 as a result of the 2008 recession. After the sale process was completed, I did not recover any of the loans I made to the Vermont Hotels (being the $800,000.00 advance in September 2007, the $750,000 advance made on December 7, 2007, the $500,000.00 advance made on December 10, 2007 the $450,000.00 advance made on December 14, 2007 and the further advances I made from 2007 to 2011 of $499,292.00. The proceeds from the sales of the Vermont Properties (after payment of secured and unsecured creditors) were not enough to pay me back.

19. Notwithstanding the concerns I had raised with Nostrand about recovering my advances to the Vermont Hotels, Nostrand took no steps to place mortgages on the Vermont Hotels to secure my advances. Ultimately, in November 2016 I brought a legal suit against Nostrand (or more properly put his estate as he had passed away) for negligence in not securing my advances to the Vermont Hotels. Attached hereto and marked as Exhibit "F" to this my Affidavit is a copy of the claim I filed in Vermont against Nostrand Estate.

20. Ultimately, the claim against the Nostrand Estate was settled and I received

$750,000.00. This is the only amount I recovered from all of my advances to the Vermont Hotels.”

Cross-Examination Evidence of Kiran

[83] At the Kiran Cross-Examination, Kiran’s evidence regarding the existence and terms of the Governing Agreement was clear and consistent.

[84] She testified:

72. Q. And when you came back, did you speak to your husband about what the status was respecting the financing of the businesses?

A. I had, not conversations but with Andrew Patel, I understood there were some requirements for the financing.

73. Q. Yes, and the financing requirements included what?

A. I would have to go back to take a look but there was a fair amount of...there was, I guess, certain things to be paid at the time. I can’t remember exactly what. I don’t recall but I do understand that the Bank of Las Vegas was willing to finance the deal as long as Sunny Nagra was not involved…

116. Q. And when you became involved on December 10th, what was the nature of your involvement?

A. I came to Boston on December 10th one, to see my son in Boston. And second to do the closings for the refinancing of the hotels and the closing of the hotels. Shashi Airi picked me up from the airport and that is where my involvement started. Shashi Airi picked me up and that is the point that Shashi told me that there were numerous payables that we were not aware of.

119. This refers to the meeting of 21 December 11, 2007.

A. Correct.

123. Q. Okay. So that is not an issue, okay. And so, at this meeting it states, " ... At this meeting Nagra and Verinder agreed to the governing agreement as follows ... " Why do you call it the "Governing Agreement"?

A. The name "Governing Agreement" was proposed by George Nostrand. I'd like to go back first, please. On December 10th, I was met by Shashi Airi and on the way to Vermont I was told of the outstanding payables and also ... a lot of outstanding payables actually. And I spoke to my husband at that time and I was very confused as to why we were going ahead if there were so many outstanding's and whether it was worth it. So we ... I also called Sunny Nagra and he told me that when we got to the hotel, we would go through it and talk about it.

Q. 124 Well…

A. So we got to the hotel and at that point Sunny Nagra, myself, and Shashi Airi went ... he didn't go through the specific payables or anything but he always ... he told me at the time that there was more than enough equity in the hotels to pay whatever payables were outstanding. Again, I was still adamant that I did not want to close this deal.

125. Q. How did you determine, if you read the previous sentence, " ... At that meeting we discussed the non-disclosed liabilities and the worsening financial situation ... " How do you know that the liabilities were not disclosed?

A. Because I hadn't seen. I knew of some payables according to Danielle Fogarty and I knew of, not payables but money to go into the closing. But not ... the payables were told to me by Shashi Airi ...

126. Q. And that was because?

A. ... that there was ... because Shashi Airi was also involved with Sunny Nagra on day to day. So he was more aware of any payables than I was.

127. Q. And so, he spoke to you about to you about that ...

A. And I confirmed ...

128. Q did he provide you with a list? Please. Did he provide a list of payables, or did

he produce for you, Mr. Airi, an accounts payable ledger?

A. Not a ledger but he did tell me that there was a lot of payments to be made.

129. Q. And so, I'm searching for what your evidence is that the liabilities were not disclosed. So Mr. Airi, is it your evidence that Mr. Airi told you that they were not disclosed?

A. Correct.

130. Q. But he didn't produce any documentary evidence about it?

A. No.

136. Q. And did you make any independent investigations of the payables?

A. Time was of the essence at that time. We were looking at either ... I was prepared to ... I was adamant actually that we should leave, take our losses and run, okay?

137. Q. All right.

A. But when I spoke to Mr. Nagra in the evening, he was very convincing that there was more than enough equity in the properties that all the payables would be fine and that we would be able to we should not have a problem.

138. Q. And did you ask Mr. Nostrand how he knew that?

A. I spoke to my husband later that night and I asked him I actually told him that I did

not want to close.

BY MR. LAAN:

149. Q. So, after you took, you made these investments, did you have continuing involvement with the hotels at that point?

A. Yes, I did. I would go every two weeks or so, after the closings.

150. Q. Right. And what was your purpose in going?

A. Well, because the governing agreement, one main thing in the governing agreement was that Sunny Nagra would assist us in selling the hotels. He would also. .. can I take a minute, please?

151. Q. If you tell me what you are reading from, I'd be happy to give you as much time as you need?

A. No, it's actually not something that is in there. One second. Sunny Nagra, prior to the closing and on the 11th, the governing agreement and Sunny Nagra had told George Nostrand, in front of Shashi Airi, with my husband that all the properties would be sold. The outstanding debts would be paid and after such depts were paid, we would also get ... I would get my 1.975, that was the extra amount. And if there was anything left over, it would be 50/50.

152. Q. . So ...

A. And at that time ... excuse me ... at that time I did ask George and George said that there was enough equity in the property.

170. Q. Were you aware at all that there were negotiations between your husband and Nagra that were tweaked from time to time in November, but it concluded that your husband would pay 3.5 million dollars and that there was a payment plan for the payment of the 3.5 million dollars. Were you aware of that? Did he tell you that?

A. Not in November, sir. Again, I was in India at the time. And I was at a wedding, and I hardly spoke to him during those couple of weeks.

171. Q. And on December 10th, you weren't aware that there was an agreement signed which provided that Nagra gets 3.5 million dollars payable over time and with the ability of your husband to substitute the first installment for a condominium you were ...

A. Yes, I was aware at that time and that's why I did not want to close.

172. Q. You did not want to?

A. I did not want to close the deal.

173. Q. Okay. And who told you that?

A. I did not ... okay. I was aware that there was an agreement but on the 11th, like I said, I had told my husband I did not want to close this deal. On the 11th morning, Mr. Nagra

called Verinder. They did not speak at that time, in the afternoon. Mr. Nagra called him back and at that time is the time that they made the deal, okay.

174. Q. I asked you. ..

A. And the deal was again ... MR. TAYAR: Mr ...

THE DEPONENT: The deal was all of the properties would be sold and the depts would be paid. I would get my 1.9 back and the rest would be 50/50. And Sunny ... after that my husband called me, we went to George Nostrand's office, all three of us. Mr. Nagra was adamant about going. Verinder told me that he would go and explain the agreement to George Nostrand and that's exactly what was done.

175. Q. And so, this agreement ...

A. And that is why George Nostrand also testified and he gave an affidavit to that effect ...

176. Q. Well we can get into that ...

A..... later on.

177. Q..... this may take longer than I anticipated but we can go into that. The fact of the

matter is though that this agreement was never reduced to writing, is that correct?

A. That is correct.

178. Q. And did you at any time say to Mr. Nostrand, "Come on, where is the agreement? Why haven't you put it into writing"?

A. If it's sitting we are sitting in a lawyer's office and there is an agreement made and he

has testified in the sentencing hearing and prior to that, and he gave us an affidavit which was much later, I thought that it was good enough that in that meeting and his being there was as good as gold.

179. Q. So, you. ..

A. Mr. Nostrand being there and him recommending for me to go ahead with the deal.

180. Q. So you did not feel that it was necessary to have ...

A. Again, at that time, no. We were pressed for time and Mr. Nagra was very concerned about his criminal proceeding because he knew if we did not go through with this deal, if the banks were not paid, his sentencing would be a lot higher.

181. Q. And so, on December 12, you didn't ask Mr. Nostrand to ...

A. No, I didn't ...

182 Q. ... commit this to writing or at any time ... please, I haven't finished my question. Bear with me. And at no time thereafter did you ask him to commit it to writing? Correct?

A. I did not ... correct, because Mr. Nagra. . .

183. Q. I can ask you ... you don't have to say . .

A..... was complying with the agreement.

192. All right. You sued Nostrand's estate, one of the allegations being that he was negligent in not committing it to the governing agreement to writing and you made that

claim notwithstanding that you, yourself, were satisfied that it wasn't necessary, isn't that correct?

A. No, that is not correct.

193. Q. Okay. How have I fallen into error?

A. At the time the governing agreement was that Nagra would assist us in selling the hotels, okay?

194. Q. I've heard all of that, yes.

A. okay.

195. Q. I've heard that [inaudible]

A. He did assist us in selling the hotels and he complied by the governing agreement. It wasn't until 2010 all of a sudden out of the blue, Mr. Nagra decides that is he going to sue Dr. Verinder Malhotra, okay? So since he was complying up to that point, I had thought, and I had assumed that it was fine. And that's why I did not request. I spoke to George the same day, or shortly after we got the letter from Mr. Murray Maltz and George, at that time, he agreed that the governing agreement stood and he was well aware of it, okay?

196. Q. Mr. Nagra continued to be involved with the hotel businesses after he was charged in October of 2007, correct?

A. Correct.

197. Q. And in part the reason he was kept on. you may not know the answer to this in

which case say you don't know, was that he was helping to refinance the properties and he was helping to prepare the properties for ultimate sale, correct?

A. That was part of the agreement, sir.

198. Q. Well, that was part of the agreement ...

A. The governing agreement ... 199.

Q. Just a minute. It was part of the agreement, I would suggest to you, starting in October of 2007?

A. No, sir, I don't recall that, but it was part of the governing agreement that he would assist in selling the properties. And it was to his advantage, obviously, if the properties were sold because he would still ... he may have thought, I don't know, that he still maybe would get something out of them. But obviously there was no equity in them and on a day-to-day basis, like I said, I put in another $500,000.

200. Q. The fact of the matter is that he stayed at the hotel with the blessing of your husband, after October 2007. And he had a function, didn't he? The function was to assist.

A. Assist. . .

201. Q. Just a minute, I haven't finished. Please.

A. Fine.

202. Q. To assist in the refinancing of the hotels and to assist with the sale of the hotels, isn't that correct?

A. To assist in the sale of the hotels, yes.

203. Q. Isn't that why he was kept on?

A. Yes.

204. Q. okay.

MR. TAYAR: Just to be clear, her testimony as I heard it, and the transcript could correct me, was that he was kept on to assist in the sale of the hotels. You added the word financing and I didn't hear that in her testimony.

THE DEPONENT: No.”

[85] As with the Bankrupt, there was also an attempt by Nagra to elicit evidence that the Bankrupt was a criminal co-conspirator with Nagra in the Kiran Cross-Examination:

“BY MR. LAAN: 275. Q. I sent to you some additional documents. This was a short email, four or five pages and I think your lawyer has provided you with copies. So it is a number

of pages starting with a letter dated August 19, 2003 from Michael Barrett of Barrett & Company. But I am asking you to flip to the second page which appears to be a cheque from Barrett & Company addressed to Kiran Malhotra, dated August 28, 2003, in the amount $70,000. What, if anything, do you know about that cheque?

A. I do not recall anything about that cheque.

276. Q. Do you. .. and if you flip the page ...

MR. TAYAR: Excuse me, Mr. Laan, do you have the original of that cheque because you've only provided us with some imprint of the front of the cheque. Do you have the original so we can examine the full document?

277. MR. LAAN: I do not. Certainly in my possession, I don't. MR. TAYAR: Okay.

BY MR. LAAN:278. And so, the next page, there appears to be a cheque in the amount of

$30,000 payable to Kiran Malhotra? MR. TAYAR: From 18 years ago?

279. MR. LAAN: From 18 years ago, that's right.

MR. TAYAR: Okay. And I don't mind if she answers your question about her recognition of the cheque, but could you help us out as to how this is germane to anything?

280. MR. LAAN: It's germane because in affidavit materials, Verinder Malhotra has said that neither he nor his family members have, in any way, benefited from this deposit scheme for which my client was charged. So I am wondering whether Mrs. Malhotra can shed any light on why there were cheques in the cumulative amount of $100,000 that were written in her favour.

MR. TAYAR: From this Barrett company?

281. MR. LAAN: Yes. And the off chance that there are financial records available, I would ask that you produce your bank statements for August and September of 2003 to verify whether you deposited those cheques into an account of your name.

MR. TAYAR: Could we start with you explaining how ... let's assume that your proposition that my client benefited from some, I guess, the fraud that was perpetrated by your client, is that what you are talking about? Is that what he was convicted of?

282. MR. LAAN: No, there is a contrary ... oh, my goodness. I've ... give me just a minute. MR. TAYAR: Sure.

283. MR. LAAN: There is evidence that Mr. Gertler objected to in the form of a report of the FBI which included a witness statement from Mr. Barrett in which he implicated both Dr. Malhotra and my client as the perpetrators of this deposit fraud. And so. . .

284. MR. LAAN: And so, having made a fuss about that in previous affidavits, I am entitled to know what these particular cheques are all about.

MR. TAYAR: So, Mr. Nagra is implicated in a fraud. You say Dr. Malhotra was also implicated in that fraud. You are not suggesting my client, I don't think, was implicated in that fraud ...

286. MR. LAAN: Absolutely not.

MR. TAYAR: I appreciate that. Thank you. So it begs the question, how does this cheque relates to whether your client has a legitimate proof of claim for 3 and a half million dollars in the estate of Dr. Malhotra?

287. MR. LAAN: Dr. Malhotra has written some interesting affidavits, both on February 13, 2019 and many affidavits prior to that in which he sets out conflicting positions. Or he changes his position from time to time when he realizes that his previous position is without merit. So, the whole business of the December 11, 2007 alleged meeting was not accorded to in three or four affidavits that were close to the event. It was only after that theory that there was an agreement of November 24 was debunked, that in our view he clearly changed positions to allege the December 11 change or amendment to the agreement between the parties. And so, Dr. Malhotra's credibility is very much at issue in this determination as to whether Mrs. Malhotra received money, presumably it would have been at the direction of Dr. Malhotra, I would never suggest otherwise, and we are not implicating Mrs. Malhotra in any criminal activity. So that's the purpose of it.

MR. TAYAR: All right. So you've asked her about the first cheque. You want to ask her about the second cheque? I mean I heard your ...

BY MR. LAAN: 288. Q. Same question which is I take it you don't remember it, or you don't recall anything about it?

A. Correct, sir.

289. Q. And then as we move along, we get to another couple of cheques. One is apparently a cheque payable to Ajit Singh in the amount of $115,000 and this is dated, it appears, June 27, 2003 from Barrett company. And there is one more and it's written as well to Ajit Singh the same ... I can't make out the date. There is no date but it appears to be in the amount of

$34,214 or it's a payment. I don't know what kind of instrument that is. The question I am asking you is simply this. Firstly, Ajit Singh was a former partner? He was a partner at the time in the hotel business, correct?

MR. TAYAR: 2003, right?

290. MR. LAAN: Yes. MR. TAYAR: Yes.

BY MR. LAAN: 291. Q. He was. And I take it as well that you have no knowledge of these cheques either?

A. No, sir.

292. Q. So it's for those reasons that I ask for the undertaking to look and we go from there. Again, I assure Mrs. Malhotra that we would ... we do not suggest that she was in on it or that she has any liability for it.

MR. TAYAR: Understood.

293. MR. LAAN: So ... and if you want to take that under advisement, that's fine to me particularly since you have other business that I am sensitive to.

MR. TAYAR: I am happy to do this. Take it under advisement in the sense that if I change my objection, I will let you know very quickly, is that fair? U/A”

[86] Whatever this document was, and whatever the “Barrett” statement to the FBI allegedly said, it was not introduced as an exhibit on this Motion, and it is apparent that the Under Advisement became a refusal, which no Court Order compelled Kiran to answer. I will have more to say regarding this attempt as well.

Evidence of Airi

[87] Also swearing an Affidavit in support of the Bankrupt’s position on this Motion is Shashi Airi (the “Airi 2019 Affidavit”) who was the regional director of the Quality Inn and Hampton Inn in Brattleboro, Vermont and the Red Roof Hotel in Killington, Vermont, and became the Regional Director of Operations of Nanak Hotel Group, whose corporate owners were, inter alia, the subjects of the Share Purchase Agreement.

[88] In the Airi 2019 Affidavit he re-states and reaffirms his prior Affidavits

a) sworn in 2013 in an Action brought in Ontario against both Nagra and the Bankrupt (the “Airi 2013 Affidavit”):

b) sworn in 2011 in the Brampton Collection Action (the “Airi 2011 Affidavit”);

c) sworn in 2017 in the Bankruptcy Proceeding (the “Airi 2017 Affidavit”)(collectively, the “Airi Affidavits”);

[89] The relevant paragraphs of the Airi 2019 Affidavit read:

“1. On January 15, 2013, I swore an affidavit in connection with Ontario Superior Court of Justice Court File No. CV-12-452359 action wherein Amarjit Mokha, Jasprit Bajaj and Ricardo Limon operating under the firm number and style of BLM Investments Partnership commenced legal proceedings against Verinder Malhotra and Gurdeep Nagra (the "2013 Affidavit"). Attached hereto and marked as Exhibit "A" to this my Affidavit is a copy of the 2013 Affidavit. I re-state and reaffirm the contents of the 2013 Affidavit including, without limitation the contents of paragraphs 13 through 22 thereof in respect of the circumstances relating to and the meeting at George Nostrand's office where the Agreement of Purchase and Sale and the Promissory Note were revised:

"13. On or about December 10, 2007, I picked up Kiran Malhotra ("Kiran"), Malhotra's wife, from the airport in Boston, upon her arrival from Ontario. At this time, I told her that there were outstanding debts of over a million dollars on the Hotel Properties. She was not aware of these debts. These debts included, among other things, writs from contractors and unpaid vendor invoices and bills,

14. I became aware of these outstanding debts, invoices and writs when, after the FBI raid on October 26, 2007, they were passed on to me as the Regional Director of the Hotel Properties.

15. Kiran shortly thereafter contacted Nagra and advised him that she and Malhotra were not prepared to proceed with the closing of the agreement of purchase and sale transaction given that they now knew about these debts. Nagra insisted that there was a significant amount of equity in the Hotel Properties, such that all of the outstanding debts would be paid and that Malhotra would still get his financial investment in the Hotel Property returned to him I way with Nagra when Kiran called him on the phone and had this discussion.

16. On or about December 11, 2007, as a result of learning about the undisclosed debts, a meeting was held at the office of George Nostrand, Malhotra's attorney ("Nostrand"). Nostrand, Kiran, Nagra and myself were present. Malhotra who was in Ontario. participated by telephone.

17. At said meeting, Malhotra and Kiran both repeatedly stated that they were very reluctant to proceed with the Agreement of Purchase and Sale and Promissory Note which had been previously negotiated.

18. Nagra insisted, although he did not produce any evidence to back up his claims, that there was sufficient equity in the Hotel Properties such that upon the sale of the Hotel Properties, all the debts would be paid, Malhotra would get all of his investment back and Malhotra would not have to personally repay any of the Hotel Properties' debts.

19. Notwithstanding Nagra's assurances, Malhotra and Kiran were still reluctant to proceed with completing the purchase of Nagra's interest in the Hotel Properties. Malhotra emphasized that he did not want to lose any more money than potentially had been lost through his initial investment in the Hotel Properties.

20. Malhotra, Kiran and Nagra discussed entering into a new agreement, based on Nagra's insistence that the Hotel Properties still had sufficient equity, whereby:

(a) All of the Hotel Properties would be sold;

(b) All outstanding debts would be paid;

(c) After such debts were paid, Malhotra would get all of the monies back from his investment in the Hotel Properties; and

(d) If there were any monies remaining after Malhotra was repaid his investment, Nagra und Malhotra would split such funds equally.

21. Nostrand told Malhotra and Kiran that it seemed like Nagra's analysis of the equity in the Hotel Properties was correct and that, if the Hotel Properties sold for the amount that Nagra believed they would, then it was not a bad deal far Malhotra to make.

22. Based on all of the foregoing, Malhotra agreement to the new arrangement, as set out above.

23. On November 28, 2011 I swore an affidavit in connection with Ontario Superior Court of Justice File No. 10-CV-43793 action wherein Gurdeep Nagra commenced legal proceedings against Verinder Malhotra (the "2011 Affidavit"). Attached hereto and marked as Exhibit "B" to this my Affidavit is a copy of the 2011 Affidavit. I re-state and reaffirm the contents of the 2011 Affidavit including without limitation paragraphs 5 through 10 (Nagra forges Malhotra's signature on over 50 occasions) paragraphs II through 14 (Nagra impersonates Malhotra) paragraph 15 (Nagra and Bajaj conspired to commit fraud) and paragraphs 16 and 17 (Nagra redirects Funds from Daljeat Singh Kamboj and Ricardo Limon).

24. On June 5, 2017. I swore an affidavit in connection with the bankruptcy of Verinder Malhotra (the "2017 Affidavit") and the claim filed by BLM Investments Partnership. Attached hereto and marked as Exhibit "C" to this my Affidavit is a copy of the 2017 Affidavit I restate and reaffirm the contents of the 2017 Affidavit."

[90] The Airi 2011 Affidavit and the Airi 2017 Affidavit do not directly provide any additional evidence relating to the Governing Agreement described above in the Airi 2019 Affidavit and the Airi 2013 Affidavit.

[91] There are no Cross-Examination Transcripts of the testimony of Airi in any of the Airi Affidavits in evidence before me on this Motion.

Evidence of Nostrand

[92] The Bankrupt has provided the Nostrand Affidavit sworn January 24, 2013 (without exhibits) as Exhibit “R” to the Bankrupt’s Affidavit. I note that, at the time of the obtaining this Nostrand Affidavit, the Vermont Negligence Action had not been commenced by the Trustee, and it was only commenced in 2016 after the Bankruptcy of the Bankrupt, and the appointment of the Trustee.

[93] Nostrand apparently died in September of 2016.

[94] In the Nostrand Affidavit Nostrand states the following regarding the existence of the Governing Agreement:

“25. The Agreement or Purchase and Sale and Promissory Note were dated and executed on November 19, 2007. Thereafter, there were various revisions made thereto in order to reflect changes required by the Bank of LVNM so that no portion of the sale proceeds of any of the hotel properties would go to Nagra until the Bank of LVNM and the other banks were fully paid.

26. On or about November 28, 2007, the Agreement of Purchase and Sale was amended to include the option of Malhotra conveying certain condominium properties in Ontario as part of the payment pursuant to the Promissory Note. I never executed this version of the Agreement of Purchase and Sale.

27. The Bank of LVNM closing was scheduled to take place on December 14, 2007. On or about December 10, 2007, Danielle Fogarty (''Fogarty''), the lawyer acting for Malhotra in closing the various refinancing transactions for the Hotel Properties discovered various large outstanding debts on the Hotel Properties, including two writs of attachment in the respective amounts of $l,500,000.00 and $105,000.00 and an unknown amount being claimed by Dr. Limon. None of these debts had been disclosed by Nagra on Exhibit A to the Agreement of Purchase and Sate. In fact, Exhibit A had disclosed very minimal liabilities or debts, exclusive of the refinancing debt.

Attached hereto and marked as Exhibit “5” are true copies of emails between Danielle Fogarty to Kiran and Verinder Malhotra and Danielle Fogarty and George Nostrand

28. Malhotra was caught completely by surprise when he learned of these undisclosed debts and was, not surprisingly, extremely upset. He had been "blindsided" and was so disturbed that he refused to close the purchase of Nagra’s interests in the Companies based on the terms set out in the Agreement of Purchase and Sale and the Promissory Note. It

was clear that Exhibit A was grossly inaccurate and could not form any basis for determining the net value of the Companies and correspondingly, the amount to be paid to Nagra under the Promissory Note.

29. On December 11, 2007, a meeting took place in my office where I, Shashi Airi, Kiran Malhotra ("Kiran''),and Nagra were present. Malhotra, who was in Ontario, participated by telephone.

30. In the course of that meeting, we re-negotiated the Agreement of Purchase and Sale and Promissory Note to take into account the fact that Nagra had concealed a number of very large debts owed by the Companies.

31. The agreement (the “Governing Agreement'') made at that meeting was to be separate and distinct from, and to supersede all other written Agreements of Purchase and Sale and Promissory Notes. The terms of the Governing Agreement to which Nagra and Malhotra consented in, among others, my presence, were as follows:

(a) Nagra would assist Malhotra in selling all of the Hotel Properties;

(b) Out of the proceeds of such sales, all of the Companies' debts would be paid;

(c) After such debts were paid, Malhotra would then be paid the sum of

$1,975,000.00, which Nagra had represented reflected the excess amount which Malhotra had invested in the Hotel Properties. In fact, given the time and other pressures which we faced, no calculations were done at the time to determine if the amount of $1,975,000 was accurate; and

(d) If, and only if, there was any monies remaining after all of the foregoing was completed, would Nagra be paid anything pursuant to the Promissory Note.

32. Given the urgency at the time to have the Agreement of Purchase and Sale close, thereby permitting the Companies to secure the needed financing from the Bank of LVNM, the Governing Agreement was never reduced to writing.

33. Notwithstanding, as set out above, the Governing Agreement of December 11, 2007 was intended by both parties to supersede the written agreements and promissory notes and I testified to this effect at Nagra's sentencing hearing on May 7, 2009.

Attached hereto and marked Exhibit “6" to my affidavit is a true copy at the transcript to my said testimony at Pgs. 16-36

34. At no time after the December 11, 2007 meeting, or at any time during the process of selling the hotel Properties, did Nagra ever say anything, make any demand, or act in any way either contrary to the terms of the Governing Agreement or consistent with the belief that he would be paid anything under the terms of the Promissory Note.

35. In fact, and wholly consistent with the provisions of the Governing Agreement, Nagra assisted in the sale of the Hotel Properties and was well aware that there were no monies left over after paying the Companies' various outstanding debts. In fact, Malhotra was never paid the sum of $1,975,000.00, or any portion of the same. Moreover, Malhotra was forced to remit further personal funds in order to ensure that all of the Companies' debts were satisfied.

36. Nagra did however significantly benefit from making and abiding by the terms of the Governing Agreement. As I advised his criminal counsel on several occasions, because of what had occurred, all of the banks were fully repaid and as a result, Nagra should receive a lesser sentence than would have otherwise have been the case. In fact, that is exactly what occurred.”

[95] For the sake of completeness the “Hotel Properties” were defined in the Nostrand Affidavit as:

“2. I was the attorney acting for the Defendant, Verinder Malhotra ("Malhotra"), in the transaction which resulted in Malhotra having to purchase from Gurdeep Nagra ("Nagra") Nagra's interest in the various companies that owned hotel properties in Vermont and New Hampshire (the "Companies" and the "Hotel Properties"), now at issue in the within action.”

[96] In the Share Purchase Agreement signed by Nostrand on behalf of the Bankrupt under the power of attorney granted by the Bankrupt, attached to the Nagra Claim and signed by Nagra, the “Companies” and the “Hotel Properties” are described as:

“WHEREAS, the Parties each hold one half of the ownership interests (whether stockholding or membership interest) in the following entities:

NS Holdings; Ltd, Inc ., a Pennsylvania corporation which owns and operates the Quality Inn and Suites and the Hampton Inn in Brattleboro, Vermont;

Nanak Resorts. Inc ., a Vermont corporation which owns and operates the Red Roof Inn in Killington, Vermont

Nanak Hospitality, LLC, a Vermont limited liability company that holds title to a 37.5 +/- acre parcel of undeveloped land in Killington, Vermont;

Guru Nanak Hotels, LLC, a New Hampshire limited liability company that owns and operates the Hampton Inn and Suites in Keene, New Hampshire; and

Nanak Hotel Group, LLC, a management entity that does not own real estate. Nanak Hotels, LLP formerly operated Hampton Inn Brattleboro;

Nanak Foods, LLC, in connection with the El Chico Restaurant & Brattleboro;

Nanak Lodging, LLC, an unfunded Massachusetts entity;

Nanak Holdings, Ltd, formerly operated Quality Inn Brattleboro;

Maple Lodging, Inc ., a newly formed entity to hold title to real estate in Brattleboro; (all together the "Companies"); and

WHEREA'S, the Mr. Nagra desires to sell his interest in the Companies for fair value and Dr. Malhotra desires to hold the entire ownership interest in the Companies, …”

[97] There are no Cross-Examination Transcripts of the testimony of Nostrand on the Nostrand Affidavit in evidence before me on this Motion.

[98] At the Nagra Sentencing Hearing in his Criminal Proceeding before the US District Court for the District of Vermont on May 7, 2009 (the “Sentencing Hearing”) Nostrand testified regarding the probability of payments being made to Nagra under the Promissory Note, or otherwise. The transcript of the Nagra Sentencing Hearing was entered into evidence by the Bankrupt as Exhibit “DD” to the Bankrupt’s Affidavit.

[99] Nostrand was called as a witness BY NAGRA, to provide evidence at the sentencing hearing to Judge Sessions that Nagra had not and would not profit from his admitted crimes, in order to deal with a Federal sentencing guideline issue that not profiting from crimes, if proven at the hearing, could reduce the otherwise required sentencing guideline amount.

[100] Nostrand was called AS A DEFENCE WITNESS FOR NAGRA and questioned by Lisa Shelkrot, Criminal Defence Counsel TO NAGRA (“Shelkrot”), a very experienced and well regarded Criminal Defence Attorney in Vermont according to The Best Lawyers in America, and a former President of the Vermont Association of Criminal Defence Lawyers.

[101] Nostrand proceeded to specifically answer Judge Sessions questions relating to the transactions and whether Nagra “Profited” from his admitted fraudulent misrepresentations to financial institutions, which would increase the sentence under the Sentencing Guidelines, asking in this exchange”:

[Shelkrot] “…And in light of the government's assertions that Mr. -- or Dr. Malhotra bailed out Mr. Nagra here, I think it's relevant for the Court to actually hear how it was that those transactions actually went about, and what happened here.

THE COURT: Well, can I ask you some just general questions before we actually have testimony. Dr. Malhotra essentially paid off the Chittenden. I mean, that's fair to say. Or did he not?

MS. SHELKROT: No, I don't think that's accurate, your Honor.

THE COURT: Well, you said that there was no loss amount, and it was either because, even though Mr. Nagra may have inflated the value of these properties to obtain loans, that

the value of the properties exceeded the amount of the loans anyway, and so therefore, there's no loss amount. That's either one theory, or the second theory is that basically the doctor took over all of these obligations, made sure that Chittenden was whole, paid all of these extra expenses and costs, and as a result, there's no loss.

[102] In the Sentencing Memorandum prepared by Shelkrot for Nagra, she disputes facts put forward in the Pre-Sentencing Report (“PSR”) filed by the U.S. Attorney:

(page 2) “The sentencing guideline for Count 1, conspiracy to make a false statement in a loan document, is correctly calculated in the PSR. While Sunny did make false statements with respect to the operations and construction of the hotels in order to inflate their perceived value, it turned out that the hotels and their operations easily supported (and indeed exceeded) the value of the loans. Substitute financing was acquired by Nanak Hotels after Sunny sold his interest, and the Chittenden Bank was paid in full (including substantial extra fees and interest). Accordingly, there no loss, and the adjusted offense level is 6.

(page 4) Errors in the PSR

The PSR erroneously states that Sunny has equity in the Nanak Hotel Group worth

$3,500,000 (PSR | 75). This is not correct. Sunny sold his entire interest in the hotel to his partner, Verinder Malhotra, in November 2007. (PSR 1 71) Sunny now has only a future interest in a promissory note. This note is unsecured (not secured, as the PSR states in 9 76). No payments have yet been made to Sunny on this note, although the first payment was due in December 2008. It is unknown whether he will ever be paid on this note, or if so, in what amount, or when. Sunny's net cash flow is negative, and without payments on the note, his net worth is negative as well. He has no current way to pay a fine.”

[103] Shelkrot called Nostrand to support this position regarding the collectability of the Promissory Note and provided the basis for the evidence being given by Nostrand to the Court and Nostrand gave the following evidence at the hearing ON BEHALF OF NAGRA :

“MS.SHELKROT: That's correct. Also, your Honor, I have attorney George Nostrand who would like to testify about some of the transactions that actually succeeded the criminal conduct here but I think arerelevant to the winding up of some of the business, and also act as a character witness for Mr. Nagra.

I have communicated to Mr. Gelber that I -- I am concerned about having a new factual allegation brought up at this stage of the proceeding. Mr. Nostrand was not involved in the sale of the residence. He became counsel for the business in the summer of 2007, and was instrumental in the refinancings, the final set of refinancings, one of which was just before the arrest here, and then the others of which were just after the arrest. And in light of the

government's assertions that Mr. or Dr. Malhotra bailed out Mr. Nagra here, I think it's relevant for the Court to actually hear how it was that those transactions actually went about, and what happened here.

MS.SHELKROT: Well, actually, I think a third option, which is what occurred here, which is that the was a transaction in the works before the arrests here for takeout financing for the Chittenden through a third-party arm's length transaction. That was in place in the summer and early fall of 2007. Then the arrest occurred. That takeout financing, through the Bank of Las Vegas, did ultimately happen and it was the Bank of Las Vegas and the proceeds of that other loan that were used to take out the Chittenden and satisfy all the obligations to them.

Now, it is the case that in the interim Mr.Nagra sold his interest, but that was because Bank of Las Vegas after the arrest said, "We don't want to have Sonny Nagra's name on any of this. He has to get out the business." But it was not Dr. Malhotra's money was a third-party arm's length transaction and a new loan.

THE COURT: So when he sold out his interest he has got apparently a note in his name. Someone's supposed to be paying him something. It's unsecured. You don't know if he is going to be paid or not. And that, you know, seems a little unusual for a person who's quite sophisticated in business world -- in business. And I am not exactly sure how this transpired. He has got -- I mean, somebody owes him money from somewhere on an unsecured note, and so just tell me -- tell me how that works.

MS. SHELKROT: Well, in fact, it was Attorney Nostrand who represented Dr. Malhotra in that transaction, so he might be in the best position to describe to you exactly how it was that that happened rather than my trying to tell you.

[In discussions with James Gelber- the Assistant US Attorney prosecuting Nagra]

THE COURT: Okay. All right? Mr. Gelber, is that -- do you have any witnesses to call as well?

MR. GELBER: Your Honor, I am not planning to call any witnesses. I do have agents here who I might call, depending on what -- how the facts play out. If Mr. Nostrand is here to explain how the defendant went from not being able to pay his bills to three and a half million dollars in unsecured notes, maybe we should hear him.

THE COURT: You find that would be extraordinary?

MR. GELBER: I'd like to work that deal myself, your Honor.

THE COURT: But it's unsecured. So, if they don't pay it, you're home free. [Questioning of Nostrand by Shelkrot]

Q And do you remember who the lender was?

A The lender was Bank of Las Vegas, but not in Las Vegas, Nevada. Las Vegas, New Mexico.

Q Oh, I didn't know that. All right. And the arrest obviously occurred, his arrest and raid on the hotels, in October of 2007. Did that affect the refinancing process?

A Yes, it did. With respect to the CIT loan, we had just closed it a couple of weeks before the arrest, and CIT called the loan; and with respect to the Bank of Las Vegas loan, the Bank of Las Vegas indicated that they were prepared to go forward with the loan but not if Sonny Nagra was involved as a principal in the company.

Q So what did you do as a result?

A At that point in time, I indicated that I had a conflict of interest, I could no longer represent Sonny Nagra and Dr.Malhotra. I referred Sonny to other counsel. With Sonny's permission, I was allowed to continue to represent just Dr. Malhotra. And I negotiated with Tom Carlson of your firm a purchase of Sonny Nagra's interests in all of the hotel operations in Vermont and New Hampshire.

Q Did the -- did the loan go through ultimately with Bank of Las Vegas? A It did. In December.

Q By that point, had Sonny Nagra's share been bought out by Dr. Malhotra?

A It had been.

Q I know you were in the courtroom a moment ago when we were discussing with the judge exactly how it was that Chittenden Bank and, to some degree, CIT got paid off. Tell us exactly how that happened.

A The Chittenden Bank was paid off completely out of the proceeds of the Bank of Las Vegas loan. The Bank of Las Vegas refinanced the Quality Inn and the Hampton Inn property, and all of the funds to pay off Chittenden came from the

proceeds of that refinancing. Our understanding with Sonny Nagra was that we weren't going to pay him on the unsecured note anything until there was a complete liquidation of the Nanak Hotel properties, including the Vermont properties and the New Hampshire properties. And if there was anything left over, we would pay on the note.

Q And has that been determined yet as we sit here today?

A No. We're still in the process of liquidating the assets. We have sold the Hampton Inn in Brattleboro. We sold the Red Roof Inn in Killington. We have sold a half interest in the property in Keene. And we have sold -- and we have -- we are in the process of negotiating right now a contract on the possible sale of what used to be the Quality Inn in Brattleboro.

Q Where're the proceeds of those sales going?

A Proceeds of those sales have all been going to pay off lenders.

Q So did Dr. Malhotra put any money into -- any of his own cash to pay off the Chittenden or pay off the loans in the fall of 2007?

A Not to my knowledge.

Q And you were representing him at that point? A That's correct.

Q So as it turns out, was the Chittenden fully secured for the loans that they made?

A I believe they were more than adequately secured. In addition to the security of the property, they had Dr. Malhotra's personal guarantee.

Q Did the Chittenden and/or CIT get anything out of these transactions other than just the principal of their loan back?

A CIT had an upfront fee of over $250,000, which they retained at the time of the takeout, and the takeout was less than 30 days after the actual booking of the loan. So they made out very, very well. They picked up a $250,000 profit on the transaction. The Chittenden Bank had all of their late fees, all of their interest, all of their attorneys' fees, all the expenses of the liqui- the -- when they brought in the company to manage the property, all those expenses were paid for out of the Bank of Las Vegas loan proceeds.

Q And I think we just covered this but I just want to make sure. The loan that Sonny received or the promissory note that he got in exchange for selling his interest in the property to Dr. Malhotra was unsecured?

A That's correct.

Q And no payments have been made on that so far? A That's correct.

Q Have you had occasion to continue working with Sonny since the arrest and since the takeout financing?

A Yes, because my assignment on behalf of Dr. Malhotra is to liquidate all of these properties and get as much money back as I can and to pay off all of his debts. He has told me that his understanding with Sonny was that Sonny would facilitate and help in any way that I needed, and so I interface with Sonny on a fairly regular basis on sale of assets, refinancing assets, in order to ultimately get my client out of -- out of the ownership of these properties.

Q And have you had an opportunity to make some observations of his character and his business dealings in general?

A I have.

Q You are aware obviously that he is here on guilty pleas to a false statement charge and to the charge of employing illegal aliens?

A I understand that.

A My experience in dealing with Sonny is that he is naive; that he oftentimes doesn't make good, quick judgments; that I oftentimes have to sit down with him and say, "Sonny, that's not right. You can't do it that way, " and he will listen to me and catch on but he is not a quick study in some of those things.

BY MS. SHELKROT:

Q. Can you think of -- is there an example of something that stands out in your mind?

A Well, I will give him draft documents, and he will retype them and then use them without telling me that he has done that, and I will say, "Sonny, that was not what you were supposed to do. Remember, it was draft." I have brought him to task on a couple of things like that, sending out stuff without me seeing it or without me approving it on behalf of my client. And I have to remind him that I'm the lawyer, and that he's not. But I don't think

any of it's ever done with any intention or wrongdoing or motivation of wrongdoing. It's just sometimes he is a little stupid on these things.

Q Okay. Thank you.

THE COURT: All right. Again, so my understanding is that you have got the -- Nanak has got these group of properties, you are selling one after another off, paying off moneys that are due on those particular properties. I still don't quite understand why he has got an unsecured note as opposed to something which is secured by any moneys above and beyond what are necessary to pay off the outstanding obligations.

THE WITNESS: Dr. Malhotra is a practicing physician and has a fairly successful medical practice in Toronto, Canada. He is not a businessman from the standpoint of knowing anything about the hotel business. He made this investment as a partner with Sonny, at Sonny's bequest: "Would you please loan -- put some money into my deals."

THE COURT: They're close friends.

THE WITNESS: They were friends. As a matter of fact, Sonny was a patient of Dr. Malhotra's. And that's how he met him.

THE COURT: Are they still close friends?

THE WITNESS: Well, it's testy. They are still friends, yes. But obviously my client wants to get his money out of the deals he put in with Sonny, and Sonny is helping him do that. And so, I think he respects Sonny for being a man of his word, and Sonny's not going to get any money until my guy gets all his money back, if he gets it all back, your Honor.

THE COURT: Well, what's -- you know, what's the best estimate? Do you know or -- THE WITNESS: Well, part of --

THE COURT: -- was there a time period in which --

THE WITNESS: Well, the time period obviously is the sooner the better. The economy obviously slowed some of that process down. We did liquidate two of the hotels now. I have got two more, and then I have got some properties that are -- that are undeveloped, which really no market for right now. I have a 40-acre parcel in Killington that ultimately would have been a nice development parcel, but there's no interest in any development in the ski areas right now. And so it may be several years, and it may ultimately be that -- that Sonny Nagra never gets nothing. The deal we made with him is, "We get our money back; then we pay on your note. "

THE COURT: Do you know roughly how much money is outstanding, how much money is still obligated?

THE WITNESS: Well, I have a million nine that's still due the Bank of Las Vegas. A million nine fifty. I have probably another million on the other property. So there's probably -- almost $3 million left of debt.

THE COURT: And do you have a rough idea of the assessed value of the properties that you have left?

THE WITNESS: They're probably -- in today's -- see, today's market is so different, your Honor, because if you asked this question a year ago, or a year and a half ago, there were more buyers in the field for development properties or hotel properties .. And so -- I am not an appraiser so I can't really give you anything but my gut, and my gut would say that there isn't a lot of equity right now. And we may in fact have to hold some of these properties until the market changes.”

[104] NAGRA WAS SITTING IN THE COURTROOM WHILE NOSTRAND GAVE THIS TESTIMONY RELATING TO THE TERMS UNDER WHICH NAGRA WOULD BE PAID UNDER THE PROMISSORY NOTE, UNDER OATH, AS A WITNESS ON NAGRA’S BEHALF, AND LATER NAGRA TESTIFIED, UNDER OATH, IN THE SAME HEARING BEFORE JUDGE SESSIONS AND DID NOTHING TO CORRECT THIS TESTIMONY BY NOSTRAND IF HE DISAGREED WITH IT.

[105] The entirety of Nagra’s testimony at the sentencing hearing, in an 86 page transcript was:

Page 9

“THE COURT: Okay. Mr. Nagra, have you read the [Pre-Sentencing] report? THE DEFENDANT: Yes, sir.

THE COURT: And aside from the factual issues that your attorney has raised for the Court, are there any other issues outstanding? Any factual mistakes in the report?

THE DEFENDANT: Not to my knowledge, sir.”

And at pages 71-73 AFTER HEARING NOSTRAND’S TESTIMONY was:

“THE COURT: Okay. Does your client wish to address the Court?

THE DEFENDANT: Your Honor, I -- I'm sorry I made a mistake, but I never meant to hurt anyone.

THE COURT: Well, when you inflated the value of the properties, when you used not quite duplicative construction contracts, one which was the real contract, the other for the benefit of the financial institution, what were you thinking?

THE DEFENDANT: Your Honor, it was a mistake. I really feel sorry for that. THE COURT: Well, it was a mistake. I am just interested to know why you did it.

THE DEFENDANT: I really feel bad about it, and it was a mistake, and -- but I never meant to hurt anyone, harm anyone.

THE COURT: Okay. And these -- these contracts that you had with your workers, the aliens that were housed, with Mr. Pinheiro as an example, what were you paying them?

THE DEFENDANT: Pinheiro, to my knowledge, your Honor, according to his contract. We have a copy of the contract.

THE COURT: You have the Mr. Saad contract. Do you have a copy of the Mr. Pinheiro – MS. SHELKROT: We do also have the Pinheiro contract, so –

THE DEFENDANT: And according to his contract, your Honor, he was getting almost -- it was $7 per room, sir, and usually the housekeepers on nationwide average does two to three rooms in one hour, and for any additional work besides cleaning of the rooms, it was

$9.50 an hour. I'm sorry, your Honor. It was -- for any additional amount of work besides the room cleaning, it was $8 per hour, and $15 -- oh, I'm sorry, $17 for deep cleaning of each room.

THE COURT: okay .

THE DEFENDANT: And plus tips. I'm sorry.”

[106] The Prosecution was requesting a custodial sentence of between 12-18 months.

[107] Judge Sessions clearly relied on the testimony of Nostrand in determining whether the “profited from crime” enhancement should have been applied to Nagra’s sentence in accordance with the Sentencing Guidelines, and the quantum of the fine that he imposed:

“THE COURT: All right. Well, in part I agree, in part I disagree.

First, let me address the guideline application issues in Mr. Nagra's case. The central issue is a question about profit, and I take as usual a moderate approach -- that doesn't mean to be overly broad, but a moderate approach to the relevant definitions. I think "profit" doesn't necessarily require commercial transaction anymore, but trying to figure out whether he profited by this kind of relationship, and I think it's not just in the sense of payment but it's some sort of larger benefit, and that's why I was trying to focus in upon his relationship with the aliens: Were they getting less? Were they being abused in some particular way? And the evidence suggests that they're -- that this defendant was in fact contracting with someone else, albeit three separate individuals who changed when, you know, they were not paid. They apparently had contracts. The contracts called for payments. Apparently

they got upset when they didn't get paid according to the contract, which suggests of course that the contracts had some significance, and then they wouldn't get paid and then they would leave in a fit of pique. But the contracts unto themselves suggest that there was some, you know, payment being made to the aliens which was consistent with, you know, approximately fair market value, as far as I can tell.

So, this is not the kind of situation in which this defendant is getting a straight benefit from abusing aliens regarding reduced wages, et cetera.

You know, this is a very technical application of a guideline, and it seems to me that, you know, this is not a for-profit situation. Indeed, he has got aliens coming in, there's no question about that, but he has got another person he is paying and paying and there's a contract, and so, you know, I am not going to apply the enhancement.

My understanding is, because the enhancement does not apply, there's an adjustment under the multiple counts rule to 11 as opposed to 13. So I am not going to apply the two-level increase.

Now, in regard to the request for a departure and adjustment, you know, the conduct is serious for a couple of reasons: The first is that he is using illegal aliens. They're here illegally. And he is -- he has got them here. But more than that, you know, there seems to be a pattern of fraudulent intent in Mr. Nagra's situation: You know, false contracts being used.

This is interesting. This creates a real problem with the guidelines, frankly, in fact, and the commission was just dealing with this kind of issue. What happens if you don't really have a loss but the financial institution would not have loaned money to a defendant without the fraudulent transaction? And, you know, there's new ways of determining, you know, what's the appropriate penalty in those situations. But in this particular case, there is no loss.

Still, there is a -- you know, a pretty deliberate misrepresentation, and I -- I just think that that's extremely serious.

You know, I look at Mr. Nagra's family situation. Obviously he is in deportation proceedings at this point. And he does have a child that is ill, a child who is ill. He has also got financial needs at this point. He is well employed but he has got financial needs, and, you know, it seems to me, in light of the fact that the enhancement is not going to be applied, that the sentencing range under the guidelines is appropriate, and I just -- I think that a departure is not warranted. There's nothing extraordinary about his family circumstances, and I think that this is an appropriate sentence in light of all of the factors under 18 USC, section 3553 (a).

And in regard to a fine, you know, this is a person who is dealing in not just hundreds of dollars or thousands of dollars but in contracts involving millions of dollars, and he may very well have a significant reimbursement in the future. I don't know.

The Court is going to do something unique: Impose a fine. If there is no way of payment within a certain period of time -- we will set that at two years -- then I will permit him to seek a remittitur if he can in fact show that there's no way at that point that he can pay it. And he is not going to be making monthly payments because he doesn't have any monthly payments he can afford at this particular point. The only question is whether, according to Mr. Nostrand, he gets reimbursed somewhere along the way. So as a result, the Court is going to impose a fine.

And would you stand, please, Mr. Nagra.

The offenses of conspiracy to make false statements in a bank loan in violation of 18 USC, section 371, and employing illegal aliens in violation of 8 USC, section 1324 (a) (3) (A) occurred between June 2003 and the late 12 summer of 2007. The guidelines apply.

Counts 1 and 2 do not meet grouping criteria. Each count is analyzed separately.

The guideline for Count 1 is in 2B1.1. Base offense level is six. Specific offense characteristics do not apply.

The guideline for Count 2 is found in 2L1.1. First, the offense level is 12. There's a three- level reduction to nine because it is not for profit. There's a three-level increase to, again, because of the number of aliens; that's between six and 24.

And there's a multiple-count adjustment, which includes an increase to one; that is to 13. There's then a two-level reduction for acceptance of responsibility to 11.

The defendant has no criminal history points, resulting in a criminal history category of one. The range is in Zone C ., Eight to 14 months.

The guideline range for a term of supervised release is at least two years but not more than three years.

It is the sentence of the Court, in two parts: First, the defendant be committed to the custody of the Federal Bureau of Prisons for a period of four months on each count, to be run concurrently, followed by a three-year term of supervised release.

Conditions of supervised release are as follows:

First, during the four months of his supervised release, he shall remain confined in his home as described in 5F1.2 for a period of four months.

During this time the defendant shall remain at his place of residence except for employment and other activities approved in advance by the probation officer.

The defendant shall maintain a telephone at his place of residence without call forwarding, modem, caller I.D ., portable cordless telephones for the above period.

At the direction of the probation officer, the defendant shall wearing an electronic monitoring device and follow electronic monitoring procedures specified by the probation officer. He shall contribute to the costs of electronic monitoring in an amount to be determined by the probation officer based on ability to pay or the availability of third-party payment.

In addition, he shall not possess any illegal controlled substances.

He shall abide by the standard conditions of supervision recommended by the sentencing commission.

He shall make fine payments until the obligation is paid in full.

He shall not incur new credit charges or open any additional lines of credit without approval of the probation officer until the obligation is paid in full.

He shall permit the defendant [sic] access to any requested financial information until the obligation is paid in full.

If the defendant is deported from the United States, he shall not enter the United States during the period of supervised release contrary to law and without permission of the U.S. Probation Office.

In addition, the defendant shall abide by all lawful directives of the U.S. Department of Homeland Security.

He shall cooperate in the collection of DNA as directed by the probation officer.

Since his history indicates a low risk of future substance abuse, the mandatory drug testing condition is suspended.

The guideline fine range in this case is from $3,000 to $30,000.

The defendant has the ability to pay a fine. A fine of $10,000 is imposed, due immediately. What he cannot pay now will be a condition of his supervised release.

Further, if the defendant has not recovered any of the moneys that are owed according to the secured note or from any other source that he is able to pay the fine within two years, he can file a petition to remit the remainder of the fine, but I'd like to assess his financial condition at that point.

Special assessment of $200 is imposed, due immediately.

Now, the Court is going to, first of all, recommend that the defendant go to a minimum security facility -- I think that would be at Fort Devens, but a minimum security facility, and I am sure he would be going to a minimum security facility.

Second, that the defendant voluntarily surrender himself to a facility designated by the Bureau of Prisons on Tuesday, June 23rd; again, that's for the four-month period.

Both the defendant and the government may have the right to appeal this sentence as set forth in Title 18 U.S. Code, section 3742. If the defendant is unable to pay the costs of an appeal, he has the right to apply for leave to appeal in forma pauperis and request the court to appoint counsel for him. If the defendant so requests, the clerk of court shall prepare and file forthwith a notice of appeal on behalf of the defendant. Notice of appeal by the defendant must be filed within 13 10 days of the date judgment is entered on the docket, 14 pursuant to Rule 4(b) of the Federal Rules of Appellate 15 Procedure.

And I want to put on the record, obviously this is a guideline sentence. If by chance, you know, the Court had ruled on profit in the other way, I still think this is the appropriate sentence. This is a person who did not essentially profit by his false statements, but I find them outrageous and requiring punishment because I just think, you know, dealing with financial institutions in this kind of underhanded way has to be discouraged. And for specific deterrence and general deterrence and punishment all under 3553 (a), I think they’re appropriate.

On the other hand, he has got strong family connections, strong family connections with his wife and child, and in particular, the child who is ill, and I just think it's important that there be some consequence; on the other hand, a light at the end of the tunnel. And so I think this is really the appropriate sentence.”

[108] Given that Nagra received a 4 month custodial sentence and a $10,000 fine and a 3 year probationary period, it is clear that Judge Sessions determined that the ability of Nagra to collect from the Bankrupt the $3.5 million US owing on the Promissory Note, based on the sworn testimony of Nostrand as to the existence of the terms of the Governing Agreement (although not referred to as such by Nostrand at that hearing), was unlikely, or else why be concerned about the affordability of a $10,000 fine when $3.5 million was owing by the Bankrupt to Nagra under the Promissory Note.

[109] Why would Judge Sessions determine that Nagra “did not profit” from his crime if he had been “bailed out” from the obligations owing to the Banks AND received a valuable completely enforceable $3.5 Million US Promissory Note?

[110] Nowhere in the 1460 Pages of Materials before me on this Motion, is there any evidence that Nostrand was ever cross-examined, on this evidence of the Governing Agreement in the Nostrand Affidavit, his testimony at the Nagra Sentencing Hearing, or otherwise.

[111] Nostrand’s evidence is therefore consistent in both his Sentencing Hearing testimony on May 7, 2009 and in the Nostrand Affidavit sworn in 2013. The cross-examination by Gelber at the Sentencing Hearing did not result in any significant contradictory admissions to that testimony.

[112] In order to believe Nagra’s argument that the Governing Agreement was “recently” made up by the Bankrupt in the Brampton Collection Action and the Bankruptcy proceedings, because it was not initially plead in the Defence to the Brampton Collection Action, ignores Nostrand’s sworn testimony as to existence of its terms in 2009, namely:

“…And so, I think he respects Sonny for being a man of his word, and Sonny's not going to get any money until my guy [the Bankrupt] gets all his money back, if he gets it all back, your Honor.”

And

“…And so it may be several years, and it may ultimately be that -- that Sonny Nagra never gets nothing. The deal we made with him is, "We get our money back; then we pay on your note.”

and Nostrand’s apparently uncontroverted evidence in the Nostrand Affidavit stating the same, with greater detail. I note that the Brampton Collection Action was commenced by Nagra DURING THE 3 YEAR PROBATIONARY PERIOD ordered by Judge Sessions in his sentencing of Nagra.

[113] It would also require the trier of fact on this Motion to believe, that contrary to the instructions of Nagra, that a Defence Attorney of Shelkrot’s reputation went rogue, and conspired with Nostrand to suborn Nostrand’s perjurious testimony about the dubious enforceability of the Promissory Note, and the postponement of payment to Nagra under the Promissory Note to repayment of the Bankrupt TO BENEFIT NAGRA AT SENTENCING BY REDUCING HIS SENTENCE, WHILE HE SAT HELPLESSLY LISTENING.

[114] Compounding this problem is the late breaking attempt in 2021, at the Bankrupt’s Cross-Examination and the Kiran Cross-Examination to attempt to introduce evidence on this Motion alleging that the Bankrupt was a co-conspirator in Nagra’s own admitted and convicted criminality, as a means of impeaching the Bankrupt’s credibility, as clearly stated by Laan in his soliloquy at Question 287 of the Kiran Cross-Examination.

[115] Besides its astounding tone-deafness, that tactic is extraordinarily problematic FOR NAGRA as nowhere in the Pre-Sentencing Memorandum’s filed by either the US Attorney or his own Defence Counsel Shelkrot is there any mention that Nagra should be given credit for cooperating with the US Attorney by providing evidence against his (now 14 years later) alleged co-conspirator, the Bankrupt. If anything would greatly reduce Nagra’s sentence, one would think that would be a big factor.

[116] There is no evidence presented by any party to the Sentencing Hearing that the Bankrupt was an alleged co-conspirator. Quite the opposite in the testimony of THE BANKRUPT’S ATTORNEY NOSTRAND ELICITED ON BEHALF OF NAGRA.

[117] As noted Paragraph 11 of the Nagra Plea Agreement specifically states:

“11. GURDERP NAGRA agrees and fully understands that in the event that the United States determines that he has failed to comply with any provision of this agreement; made any false statement to investigators or attorneys of the United States or willfully failed to disclose information; made any false statements or committed any perjury before a grand jury, before any trial court, or at any other proceeding, had any unauthorized contact with any potential defendants in this case or in cases in which he is a potential witness pursuant to this agreement; or since the date of this agreement, committed any state, local or federal offense or has failed to disclose any crimes he has committed; the United States will have the right to: (1) terminate this agreement and prosecute him for any and all offenses, including false statements and perjury, with which he could properly be charged (including reinstatement of any charges dismissed pursuant to this agreement), or (2) terminate only its obligations under this agreement while retaining the defendant's guilty plea. Furthermore, GURDEEP NAGRA fully understands that should he fall to fully comply with any provision of this agreement, the United States will have the right to use the agreement itself against him at any trial, hearing or sentencing. He also understands that the Government may use any sworn or unsworn statements given by him and any information, materials, documents or objects provided by him to the United Steres pursuant to this agreement, including self-incriminating information referred to in paragraph 4 of this agreement, against him. The defendant waives his right to challenge the admissibility of this agreement and the information provided pursuant to this agreement into evidence under Federal Rule of Criminal Procedure 11 or any other provision of law.”

[118] There is no evidence before this Court that the Bankrupt was charged or convicted of any crime in connection with the facts in evidence before this Court and relating to the subject matter of the Bankrupt’s Affidavit or the other affidavits properly entered into evidence before me.

[119] In fact Nagra’s only evidence before me on the topic of the possibility of the existence of co-conspirators was the following statement by Nagra at the Sentencing Hearing:

“THE DEFENDANT: Your Honor, I -- I'm sorry I made a mistake, but I never meant to hurt anyone.”

[120] I was so concerned by the positions taken, and tactics adopted, by Nagra on this hearing that so fundamentally contradicted the positions taken in his Plea Agreement and the testimony of Nostrand in his favour, AS HIS WITNESS, AT HIS SENTENCING HEARING, that obviously reduced his sentence by Judge Sessions, and the jeopardy that could put Nagra in by possibly vitiating his Plea Agreement, having allocuted as part of the Plea Agreement and in his Sentencing Hearing to a particular set of facts that he seemed now to be resiling from 13 years later to try to collect on the Nagra Claim, that I stopped the hearing of the Motion and directed Laan to seek instructions from his client as to whether he wished to continue opposing the Expungement Motion.

[121] After a break Laan confirmed Nagra’s instructions that he wished to proceed to continue to argue that the Governing Agreement did not exist DESPITE NOSTRAND’S CLEAR

EVIDENCE, GIVEN FOR NAGRA’s BENEFIT, UNDER OATH, IN HIS PRESENCE, IN 2009, THAT:

And

. “…And so, I think he respects Sonny for being a man of his word, and Sonny's not going to get any money until my guy [the Bankrupt] gets all his money back, if he gets it all back, your Honor.”

“…And so it may be several years, and it may ultimately be that -- that Sonny Nagra never gets nothing. The deal we made with him is, "We get our money back; then we pay on your note.”

[122] So be it.

[123] Laan also made the submission, after this break, that Nagra, as a criminal defendant, was at a disadvantage and therefore was helpless to stop his apparently highly experienced, very reputable Defence Attorney from making submissions Nagra (now) disagreed with, and calling Nostrand as a witness, whose sworn evidence Nagra (now) disagreed with regarding the existence of the Governing Agreement (now denied), while (successfully) attempting to reduce his custodial sentence and fine.

[124] This was echoed the following statements in Nagra’s Factum: “130. Paragraph 73 of the Bankrupt’s Factum states, in part:

“Nagra told the Vermont Court that it was “unknown whether he will ever be paid on the note, or if so, in what amount or when”, which could be true only if he were bound by the Governing Agreement.”

This is not correct. The debt was unsecured and payment was dependent upon the Bankrupt’s credit-worthiness. As it turned out, he was not credit-worthy.

131. Still with respect to paragraph 73, Mr. Nostrand testified as to his understanding

of the arrangement. His understanding was incorrect. Mr. Nostrand had previously taken a different position stating that the Vermont Hotel transaction closed on the basis of the November 19, 2007 agreement. [Nagra] was not in a position to speak at the hearing.

132. The Creditor’s position on this motion is not inconsistent with an earlier position, much less “clearly inconsistent”.”

[125] I found that to be an utterly incredible submission, particularly given there was no evidence before the Court to support that Nostrand had taken such a contrary position allowing that statement to be made in Nagra’s Factum, and plenty of evidence from the transcript of the

evidence of Nostrand at the Sentencing Hearing to discount it, and advised Laan of that view, in no uncertain terms.

IV) Law and Analysis

[126] The Court has considered all materials and arguments raised by all parties on this Motion. Any failure by the court to refer to specific arguments and materials raised does not reflect that the Court has not considered those arguments. Where quotations or documents are underlined in these reasons, that emphasis has been added by me.

A. Legislation and Jurisdiction:

[127] S.135 of the BIA reads:

Trustee shall examine proof

135 (1) The trustee shall examine every proof of claim or proof of security and the grounds therefor and may require further evidence in support of the claim or security.

Determination of provable claims

(1.1) The trustee shall determine whether any contingent claim or unliquidated claim is a provable claim, and, if a provable claim, the trustee shall value it, and the claim is thereafter, subject to this section, deemed a proved claim to the amount of its valuation.

Disallowance by trustee

(2) The trustee may disallow, in whole or in part,

(a) any claim;

(b) any right to a priority under the applicable order of priority set out in this Act; or

(c) any security.

Notice of determination or disallowance

(3) Where the trustee makes a determination under subsection (1.1) or, pursuant to subsection (2), disallows, in whole or in part, any claim, any right to a priority or any

security, the trustee shall forthwith provide, in the prescribed manner, to the person whose claim was subject to a determination under subsection (1.1) or whose claim, right to a priority or security was disallowed under subsection (2), a notice in the prescribed form setting out the reasons for the determination or disallowance.

Determination or disallowance final and conclusive

(4) A determination under subsection (1.1) or a disallowance referred to in subsection

(2) is final and conclusive unless, within a thirty day period after the service of the notice referred to in subsection (3) or such further time as the court may on application made within that period allow, the person to whom the notice was provided appeals from the trustee’s decision to the court in accordance with the General Rules.

Expunge or reduce a proof

(5) The court may expunge or reduce a proof of claim or a proof of security on the application of a creditor or of the debtor if the trustee declines to interfere in the matter.

[128] S.37 of the BIA reads:

Appeal to court against trustee

37 Where the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the court and the court may confirm, reverse or modify the act or decision complained of and make such order in the premises as it thinks just.

Jurisdiction of Court under s.135 and s.37 on this Motion

[129] Factually, the parties agree that the Trustee, by settling or compromising the Nagra Claim at the amount of $2,580,000.00, like In Re Beynon (2003), 2003 CarswellOnt 3515, 45

C.B.R. (4th) 172 (Ont. S.C.J), this is a situation where as the trustee had agreed to compromise a claim, the Trustee had either refused to disallow the Nagra Claim as requested by Gertler, or had allowed the Nagra Claim at the settled amount of $2,580,000.00, both of which provide this court with jurisdiction to expunge or reduce the Nagra Claim under s. 135(5) of the BIA by implication.

Onus of Proof and Standard of Proof on Motion to Expunge

[130] The onus of proof on a motion to expunge is on the party seeking to have the claim expunged: Badger, Re (1929), 1929 CanLII 129 (SK CA), [1930] 2 D.L.R. 88 (Sask. C.A.)

[131] As per Re Marsuba Holdings Ltd. (1998), 1998 CanLII 5248 (BC SC), 8 C.B.R. (4th) 268, 1998 CarswellBC 2792 (B.C. Master) (“Marsuba”) on this application under s. 135(5), it is unnecessary for the Bankrupt to show that the trustee acted unreasonably or improperly in allowing the claim. The Bankrupt must prove on the merits that the claim should not be allowed.

[132] In Marsuba Registrar Bolton states:

“15 Quite apart from questions of natural justice raised by this position (where officials would be given the power to make decisions on the legitimacy of claims, subject to no review other than on questions of the reasonableness of their conduct) this construction of s.135(5) is contrary to the tenor of s.135 as a whole. The first four sub-sections deal with the procedure to be followed where a creditor appeals the disallowance of a claim by a trustee, and in such cases the appeal is decided simply on the basis of the legitimacy of the claim. There is no reason at all why different considerations should apply to appeals of a decision by the trustee to allow a claim. The only question should be whether the claim is indeed legitimate.”

[133] The correct standard of proof for a motion to expunge is that of the balance of probabilities: Re Karataglidis (2003), 2003 CanLII 64281 (ON SC), 47 C.B.R. (4th) 241, 2003 CarswellOnt 5795 (Ont. S.C.J.) and Marsuba at para. 19. (“Karataglidis”)

[134] Burnyeat, J. in Roberts v. E. Sands & Associates Inc. 2013 CarswellBC 1618, 2013 BCSC 902, [2013] B.C.W.L.D. 7278, 228 A.C.W.S. (3d) 925 reversed on other grounds Roberts v. E. Sands & Associates Inc. 2014 BCCA 122, 2014 CarswellBC 846, [2015] B.C.W.L.D. 1412,

353 B.C.A.C. 217, 603 W.A.C. 217, 241 A.C.W.S. (3d) 22, 60 B.C.L.R. (5th) 259, 10 C.B.R.

(6th) 263, [2014] B.C.W.L.D. 2759 (B.C. C.A., Apr 2, 2014) (“Roberts v. E. Sands”):

“31. The onus is on Mr. Roberts who seeks to have the claim expunged: Badger, Re (1929), 1929 CanLII 129 (SK CA), [1930] 2 D.L.R. 88 (Sask. C.A.); Purdy, Re (1997), 1997 CanLII 2168 (BC SC), 50 C.B.R. (3d) 225 (B.C. S.C. [In

Chambers]), at para. 32; Marsuba Holdings Ltd., Re (1998), 1998 CanLII 5248 (BC SC), 8 C.B.R. (4th) 268 (B.C. Master); Karataglidis, Re (2003), 2003 CanLII 64281 (ON SC), 47 C.B.R. (4th) 241 (Ont. S.C.J.) at para. 6; Magi, Re, [2008] Q.J. No. 14841 (C.S. Que.) at para. 20; Royal Bank v. Insley (2010), 2010 SKQB 17, 64 C.B.R. (5th) 105 (Sask. Q.B.); and Yehia, Re, [2012] B.C.J. No. 2042 (B.C. S.C.).

32 In a civil action, the Represented Respondents would have to prove a claim on a balance of probabilities. Mr. Roberts bears the same onus of showing that the claims of the Represented Respondents should be expunged in whole or in part.”

[135] The Bankrupt in his Factum states the test under s.135 differently:

67. On a motion pursuant to s. 135(5), the moving party has the onus of demonstrating on a balance of probabilities that the impugned proof of claim does not disclose a claim provable in the bankruptcy.52 Stated differently, the moving party must “establish error on the part of the trustee in finding that the claim was legitimate.”53 Malhotra can discharge that onus.

[136] For this proposition, that error by the Trustee must be established by the Moving Party on a section 135 Motion, the Bankrupt cites Re Yehia 2012 BCSC 1467 (“Yehia”) at paragraph 16 where Weatherill, J. states:

“[16] Where a creditor appeals a decision by a trustee to allow a claim, the only question for consideration is whether the claim is indeed legitimate: Marsuba Holdings Ltd. (Re), 1998 CanLII 5248 (BC SC), [1998] B.C.J. No. 2943, 8 C.B.R. (4th) 268 at para.

15. The onus rests with the applicant to establish error on the part of the trustee in finding that the claim was legitimate: Royal Bank of Canada v. Insley, 2010 SKQB 17, 64 C.B.R. (5th) 105 at para. 30.”

But in Paragraphs 24-25 Weatherill, J. states:

“[24] On the evidence before me, I cannot find that Wilson’s claim that he is entitled to $556,000 is legitimate. The appeal of Master Baker’s decision in that regard is dismissed.”

[25] Master Baker awarded costs of the application before him against Wilson. Wilson argues that he was simply opposing the applicant’s challenge to the decision of the trustee and that Master Baker ought not to have awarded costs against him. If anything, he argues, the costs should have been awarded against the trustee. I disagree. The application before Master Baker was necessitated by Wilson providing the trustee with an illegitimate claim. The award of costs against Wilson was appropriate.”

[137] The “error by the Trustee” aspect of the test in Yehia is not discussed, and it is clear that the issue under s.135 (as opposed to s.37 of the BIA that does deal with aggrievement from the decision of the Trustee, not necessarily involving a proof of claim) is the legitimacy of the claim, rather than the “error of the trustee” in admitting it, making the process by which the Trustee admitted the claim less important than the actual legitimacy of the claim. In most cases that distinction would not be that relevant, but in the unique circumstances in this case where the Nagra Claim was compromised and settled by the Trustee, it is.

[138] I note that in Yehia costs were awarded against the Creditor filing the illegitimate claim, and opposing the s.135 motion, and not against the Trustee in Yehia, and as in this case, it does not appear that the Trustee opposed the s.135 motion.

[139] The quote from Royal Bank of Canada v. Insley, 2010 SKQB 17, 64 C.B.R. (5th) 105 at para. 30, (“RBC v. Insley”) cited by Weatherill, J. in Yehia indicates that there are TWO different roads that a Court can follow under s.135, and reads:

[30] The application before me is one to expunge two claims filed and admitted by the trustee. The onus rests with RBC to establish error on the part of the trustee, or in keeping with the approach taken in Marsuba, to establish these were not “legitimate” claims. In my view there is no need to explore the contours of what is or is not a legitimate claim, or other collateral issues arising on appeal (issues not argued by the parties) for the simple reason that RBC abandoned its initial argument that the impugned claims were not filed prior to Insley’s discharge or disclosed by the trustee. In any event, no argument was advanced nor evidence presented concerning the underlying validity of the claims or their allowance. There is no suggestion whatsoever that the trustee improperly interpreted the law, ignored crucial facts, exercised its discretion improperly or acted outside of its authority in the course of exercising its function under s. 135. For all of these reasons, RBC’s initial argument fails.”

[140] Accordingly, based on this combined jurisprudence in Marsuba, Yehia and RBC v Insley, under s.135(5) the court may expunge or reduce a proof of claim or a proof of security on the application of a creditor or of the debtor if the trustee declines to interfere in the matter, where the Moving Party satisfies it’s onus to prove, on the balance of probabilities, that:

1. the claim was admitted through error on the part of the Trustee; OR

2. in keeping with the approach taken in Marsuba, to establish these were not “legitimate” claims.

Independent Jurisdiction of Court under s.135

[141] In Re Syndic d’Isolation Techno-Pro inc. (2019), 2019 QCCS 5825, 2019 CarswellQue 3527, EYB 2019- 311307 (C.S. Que.). (“Techno-Pro”) Riordan J.S.C. of the Quebec Superior Court found that where a creditor’s proof of claim contained willfully false statements and willful misrepresentations the Court can on its own initiative expunge the whole of the proof of claim, even where the Motion to expunge has been dismissed for Delay and nothing in the BIA prohibits the Court from initiating an intervention, and that it is implicitly authorized to do so in appropriate circumstances. Riordan J.S.C. held that it does not make sense that a Court should be barred from acting on its own initiative in situations where the actions to be sanctioned are serious, which would include, at the very least, some level of improper behaviour, and could go as far as fraud or criminal acts. He further held that where the court becomes aware of such circumstances in a proceeding in which it is seized, it cannot sit idly by and allow an injustice to be perpetrated simply because that proceeding is invalid for procedural reasons or otherwise.

[142] In Techno-Pro, Riordan J.S.C. states:

“99 Thus, if it were necessary, we could justify our intervention using article 49 of the Code. But it is not necessary, for the language of the statute gives us this power, albeit

implicitly.

100 Returning to Tariq, the judge’s comments on the language of the BIA, which he contrasts to that of two Quebec statutes, are clearly obiter dictum. This is underlined by the opening words of his paragraph 14: “At first glance”.

101 The Tariq case was flagrant and the judge had more than ample grounds to overturn the first judgment for the reasons he examines in paragraphs 15 and following. Hence, in light of the other errors, it was not necessary to do any further analysis of the language of the statute.

102 On the other hand, had he chosen to go that route, he would have first had to analyze that language in detail before looking outside the statute at other examples. We propose to do that now, i.e., analyze the language of the BIA.

103 While noting that the BIA has numerous provisions requiring an application from a party, the judge points out that it does not contain language specifically permitting a court to act on its own motion. So be it, but there are also provisions that are silent on the matter. That silence must be interpreted.

104 In that respect, were the BIA to contain provisions specifically foreseeing the court’s acting on its own initiative, that could be telling. It might well limit the court’s power to act proprio motu. But there apparently are none. Consequently, since there is nothing in the statute that prohibits the court from initiating an intervention, we are of the view that we are implicitly authorized to do so in appropriate circumstances.

105 Moreover, the judge in Tariq recognizes this. Although an application of the court’s inherent jurisdiction or discretionary power was neither sought nor required there, the judge nevertheless accepts the possibility of unilateral intervention when he states that this was not “one of those exceptional cases where a registrar might be able to act proprio motu (sic) « contrôler les abus manifestes de façon à maintenir la crédibilité générale du système. » of the BIA”⁴¹ .

106 In our view, the present matter is, in fact, one of those exceptional cases.

107 Everything said, it simply does not make sense that a court should be barred from acting on its own initiative in situations like we have here. The actions to be sanctioned under section 125 are serious. They would include at the very least some level of improper behaviour, and could go as far as fraud or criminal acts.”

108 Where the Court becomes aware of such circumstances in a proceeding of which it is seized, it cannot sit idly by and allow an injustice to be perpetrated simply because that proceeding is invalid for procedural reasons - or otherwise. We have the implicit power to intervene based on a large and liberal interpretation of the provisions of the BIA. We could also justify our intervention on the basis of an exercise of our discretion or inherent

jurisdiction to see that justice is done.

109 For these reasons, the Court will issue an order disallowing in whole Glasscell’s proof of claim. As well, on the issue of court costs, the circumstances here are exceptional to the point that, in spite of dismissing Axxys’s Motion to Expunge, the Court will grant it costs.”

[143] I note that Riordan J.S.C. decided Techno-Pro on May 2, 2019. S. 4.2 of the BIA, implementing the duty of Good Faith under the BIA, became effective on November 1, 2019 so was not part of the BIA when Techno-Pro was argued. I will deal with the impact of s.4.2 of the BIA on the Nagra Claim, in light of the evidence presented on this Motion, separately.

Sections 125 and201 of the BIA

[144] Section 125 of the BIA, referred to in Techno Pro by Riordan J.S.C. as providing independent ability to the Court under the BIA to disallow claims reads:

“125. Penalty for filing false claim

Where a creditor or other person in any proceedings under this Act files with the trustee a proof of claim containing any wilfully false statement or wilful misrepresentation, the court may, in addition to any other penalty provided in this Act, disallow the claim in whole or in part as the court in its discretion may see fit.”

[145] With respect to s.125 of the BIA, Bankruptcy and Insolvency Law of Canada, 4th Edition, The Honourable Mr. Justice Lloyd W. Houlden, Mr. Justice Geoffrey B. Morawetz, Dr. Janis P. Sarra (“ Houlden & Morawetz”) states:

Ҥ 6:154. False Statements or Misrepresentation in Proof of Claim

A proof of claim containing a wilfully false statement or wilful misrepresentation may be disallowed by the court in whole or in part: s. 125. A greater penalty is thus imposed by s. 125 on a creditor for filing claims with false statements than merely having the false item struck out. The possibility of having a claim disallowed in its entirety for the insertion of a false item gives great assurance that proofs of claim will be prepared carefully, accurately and honestly.

Other penalties are imposed by s. 201(1) on creditors who, wilfully and with intent to defraud, make false claims or any proof, declaration or statement of account that is untrue in any material particular. See § 9:12.19:2 “False Claims by a Creditor”.

Section 125 does not affect the security of a secured creditor and the disallowance of the claim would not mean a loss of the security. In any event, the court may give a creditor

leave to amend its proof in a proper case: Re Hansard Spruce Mills Ltd. (1953), 1953 CanLII 249 (BC SC), 33 C.B.R. 217 (B.C. S.C.).

Where a creditor hid from the trustee the fact that it had made an illegal seizure of the debtor's goods, the court reduced the debtor's claim by one-third: Re Canadian Vinyl Industries Inc. (1978), 29 C.B.R. (N.S.) 12, 1978 CarswellQue 60, [1978] C.S. 473 (Que. S.C.).

The Québec Superior Court dismissed a motion to expunge a creditor's proof of claim on account of delay. However, the Court then declared that the creditor's proof of claim contained willfully false statements and willful misrepresentations and consequently disallowed the whole of the proof of claim. Justice Riordan held that nothing in the BIA prohibits the court from initiating an intervention, and that it is implicitly authorized to do so in appropriate circumstances. In his view, the present matter was, in fact, one of those exceptional cases. Justice Riordan concluded that it simply did not make sense that a court should be barred from acting on its own initiative in situations where the actions to be sanctioned are serious. They would include, at the very least, some level of improper behaviour, and could go as far as fraud or criminal acts. Where the court becomes aware of such circumstances in a proceeding in which it is seized, it cannot sit idly by and allow an injustice to be perpetrated simply because that proceeding is invalid for procedural reasons or otherwise: Syndic d'Isolation Techno-Pro inc., 2019 CarswellQue 3527, 2019 QCCS 5825, 71 C.B.R