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2020 (9) TMI 941 - AT - Insolvency and BankruptcyMaintainability of application - Initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial debt or not - Aggrieved Person or not - HELD THAT - It is to be borne in mind that in a subsisting application, liability to pay a sum of money is condition precedent of a 'Financial Debt'. The 'Financial Debt' represents the money payable in respect of loan borrowing made by a Corporate Debtor. In short, the sum of money is certainly and in all events payable is a 'Debt', disregard to the fact whether it is payable now or at a later point of time, in the considered opinion of this Tribunal. Indeed, in Part II of the IBC, Section 63 expressly oust the 'Jurisdiction' of a 'Civil Court' or an 'Authority' and specifies that such Civil Court or an 'Authority' cannot entertain any suit or proceedings which are in the nature of a 'lis' in respect of which the 'National Company Law Tribunal' or 'National Company Law Appellate Tribunal' has jurisdiction. As per Section 7 of the Code, a Financial Creditor' can initiate 'Insolvency Proceedings' against the 'Corporate Debtor' before the 'Adjudicating Authority'. Section 4 of the Code says that Part II applies to all matters relating to 'Insolvency' and 'Liquidation of 'Corporate Debtors' where the minimum amount of the default is Rs. One Lakh. In terms of Section 9 of the Code, an 'Operational Creditor' after fulfilling the requirements of Section 8, can initiate the 'CIRP' against the 'Corporate Debtor' before an Adjudicating Authority. In pith and substance if the 'Debt' due and payable is above One lakh rupees, then the Application for 'Corporate Insolvency Resolution' can be filed before the Adjudicating Authority i.e. NCLT and not before any other fora. Furthermore, the ingredients of Section 238 of the Code operates against other laws when they are in conflict with the Code - the Application (under Section 7 of the Code) filed by the 1st Respondent/Applicant (Financial creditor) is perfectly per se maintainable in Law. As far as the present case is concerned, the 'Memorandum of Understanding' consists of two transactions i.e. one is related to the granting of loan and the other is in regard to formation of SPV. These transactions are quite independent of each other. The Loan was given by the Respondent to the 'Corporate Debtor' and its group Companies and for which promissory notes were executed. Section 5(7) of the Code defines 'Financial Creditor' meaning any person to whom a Financial Debt is owed and includes a person to whom such debt has been legally assigned or transferred - Considering the fact that in the instant case, there is a 'Debt' and 'Due' payable by the Corporate Debtor and a default was committed by the Corporate Debtor, this Tribunal without any haziness holds that the impugned order of the Adjudicating Authority ('National Company Law Tribunal, Kolkata Bench) dated 25.10.2019 in admitting the Section 7 Application filed by the Respondent/Financial Creditor is free from any patent illegalities. Appeal dismissed.
Issues Involved:
1. Whether the financial assistance provided by the Respondent constitutes a "financial debt" under the Insolvency and Bankruptcy Code (IBC), 2016. 2. Whether the Memorandum of Understanding (MoU) between the parties created a simple loan agreement or a joint business venture. 3. Whether the existence of arbitration proceedings affects the maintainability of the insolvency application. 4. Jurisdiction of the National Company Law Tribunal (NCLT), Kolkata Bench to adjudicate the matter. Detailed Analysis: 1. Financial Debt under IBC: The primary issue was whether the financial assistance provided by the Respondent to the Corporate Debtor constituted a "financial debt" under Section 5(8) of the IBC, 2016. The tribunal observed that the MoU dated 11.12.2015 clearly indicated that the amount provided was to be returned with bank rate of interest within 30 days but not later than 89 days. The tribunal relied on the definition of "financial debt" which includes any debt disbursed against the consideration for the time value of money. The tribunal emphasized that the amount disbursed by the Respondent had the commercial effect of borrowing and hence qualified as a financial debt. 2. Nature of the MoU: The Appellant contended that the MoU was not a simple loan agreement but a joint venture for executing work for the Kolkata Port Trust (KOPT). The tribunal noted that the MoU consisted of two independent transactions: one related to the granting of a loan and the other to the formation of a Special Purpose Vehicle (SPV). The tribunal held that the loan transaction was independent of the SPV formation and that the loan given by the Respondent was indeed a financial debt. The tribunal pointed out that the promissory notes executed by the Corporate Debtor and its group companies further evidenced the loan nature of the transaction. 3. Arbitration Proceedings: The Appellant argued that the existence of arbitration proceedings constituted a pre-existing dispute, thus affecting the maintainability of the insolvency application. The tribunal rejected this argument, stating that pending arbitration proceedings do not limit the initiation of insolvency proceedings under the IBC. The tribunal cited the decision in SSMP Industries V. Peerkam Food, which held that the prohibition under Section 14 of the IBC does not apply to claims preferred by the Corporate Debtor, and both claims and counterclaims can be adjudicated together. 4. Jurisdiction of NCLT, Kolkata Bench: The Appellant challenged the jurisdiction of the NCLT, Kolkata Bench, arguing that the application should have been filed in Chennai based on the MoU. The tribunal dismissed this argument, stating that the registered office of the Corporate Debtor was in Kolkata, thus giving jurisdiction to the NCLT, Kolkata Bench. The tribunal further emphasized that Section 63 of the IBC ousts the jurisdiction of civil courts or other authorities in matters where the NCLT or NCLAT has jurisdiction. Conclusion: The tribunal concluded that there was a debt due and payable by the Corporate Debtor, and a default had been committed. The loan given by the Respondent constituted a financial debt under the IBC. The tribunal upheld the impugned order of the NCLT, Kolkata Bench, admitting the Section 7 application filed by the Respondent/Financial Creditor. The appeal was dismissed, and the application was deemed maintainable in law.
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