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2018 (12) TMI 965 - Tri - Insolvency and BankruptcyCorporate insolvency process - ) Whether the amount claimed by the Financial Creditors is an Investment or it is an amount advanced as a Loan? - Whether the amount claimed by the Financial Creditors is discharged as on date or is still in continuance? - Held that - The amount advanced by the Financial Creditors is an amount advanced as Loan . Moreover the Debtor has not made out a case of disbursement of any Dividend or Profit so as to demonstrate the impugned transaction at all related to an Investment. Though there is pending dispute, prior to institution of the Petition U/s. 7 of the Code, the Adjudicating Authority need not to look into that dispute for the adjudication of the S. 7 Petition. In this case, the Bench has also perused the Orders of the Hon ble Bombay High Court in the said Civil Suit and noticed that the Hon ble Bombay High Court, in any way, has not restricted this Bench from proceeding in this case. At the cost of repetition, the issues in that Suit are altogether different and do not relate the question of default in repayment of an admitted Financial Debt. As far as the question of the default is concerned, it has already been established supra. Hence, to conclude the discussion it can be stated that the Petition under Adjudication deserves Admission. The facts of the case have already established that the amount claimed is Financial Debt as defined U/s. 5 (8) of the Code and there is a Default in the re-payment of the Debt as defined U/s. 3 (12) of the Code. As a consequence, keeping admitted facts in mind that the Financial Creditor had not received the outstanding Debt from the Corporate Debtor and that the formalities as prescribed under the Code have been completed by the Financial Creditor the Bench is of the conscientious view that this Petition deserves Admission .
Issues Involved:
1. Whether the amount claimed by the Financial Creditors is an investment or a loan. 2. Whether the amount claimed by the Financial Creditors is discharged or still outstanding. 3. Maintainability of the application under the Insolvency and Bankruptcy Code (IBC). 4. Jurisdiction of the National Company Law Tribunal (NCLT) in light of the pending Civil Suit before the Bombay High Court. Issue-wise Detailed Analysis: 1. Nature of the Amount Claimed: Investment or Loan The Financial Creditors argued that the amounts disbursed to the Debtor were loans, evidenced by TDS certificates under Section 194A of the Income Tax Act, indicating interest payments. The Debtor, however, claimed these amounts were investments with profit-sharing terms, not loans. The Tribunal examined the TDS certificates and concluded that the amounts were indeed loans, as TDS under Section 194A pertains to interest on loans, not profit distribution. Therefore, the Tribunal determined that the amounts advanced by the Financial Creditors were loans, not investments. 2. Discharge of the Claimed Amount The Debtor contended that the debt was discharged through the transfer of shares to the Financial Creditors' directors, a matter under adjudication in a Civil Suit before the Bombay High Court. However, the Tribunal found no evidence of such share transfers and noted that the alleged fraud was not yet established. Consequently, the Tribunal concluded that the claimed amount was not discharged and remained outstanding. 3. Maintainability of the Application under IBC The Debtor challenged the application’s maintainability, arguing that there was no written agreement for the loans and that the terms of interest were never agreed upon. The Tribunal dismissed these arguments, emphasizing that the TDS certificates and the Debtor's acknowledgment of the loans in its Annual Report for FY 2016-17 as "Long Term Borrowings" substantiated the Financial Creditors' claims. The Tribunal also highlighted that the Financial Creditors had completed all procedural formalities under the IBC. 4. Jurisdiction of NCLT in Light of the Pending Civil Suit The Debtor argued that the NCLT lacked jurisdiction due to the pending Civil Suit before the Bombay High Court, which involved allegations of fraud and the issue of debt discharge. The Tribunal rejected this argument, clarifying that the issues in the Civil Suit were unrelated to the financial debt in question. The Tribunal referenced the Supreme Court's judgment in "Innovative Industries v. ICICI Bank," which stated that the adjudicating authority need not consider pending disputes for Section 7 petitions under the IBC. Therefore, the Tribunal affirmed its jurisdiction to adjudicate the matter. Conclusion: The Tribunal found that the amounts claimed by the Financial Creditors were loans, not investments, and that the debt was not discharged. The application was deemed maintainable, and the Tribunal had jurisdiction despite the pending Civil Suit. Consequently, the Tribunal admitted the petition, initiating the Corporate Insolvency Resolution Process (CIRP) against the Debtor, and appointed an Interim Resolution Professional (IRP). The Tribunal also ordered the commencement of the moratorium as prescribed under Section 14 of the IBC, prohibiting the institution of any suits and the transfer of assets, while ensuring the supply of essential goods and services to the Corporate Debtor.
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