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Home Case Index All Cases Insolvency and Bankruptcy Insolvency and Bankruptcy + Tri Insolvency and Bankruptcy - 2018 (12) TMI Tri This

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2018 (12) TMI 965 - Tri - Insolvency and Bankruptcy


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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