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2022 (1) TMI 461 - AT - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - it is alleged that Appellant failed to produce proper authorisation for initiation of CIRP and has filed the Petition with false and fabricated documents - HELD THAT - Keeping in view the definition of Financial Debt as defined under Section 5(8) of the Code; the nature of transactions entered into between both the parties; that there are several transactions some executed on the same day, between Satra Realty and Builders Limited and Satra Properties Development Limited together with the admitted fact that the Respondent Company was a part of the Satra Group ; that the Directorship is common in all the Satra Companies ; it was only on 09.04.2018 that the name of the Respondent Company was changed to Centrio Lifespaces Limited with the new management stepping in; that the statement of account appended to the Petition is signed by Mr. Praful Satra, the erstwhile Director of the Respondent Company; the entries of debit and credit dated 07.11.2015, 10.11.2015, 24.11.2015 (Exhibit K) establish several internal transactions between the Satra Group Companies ; the Auditor s Report detailing the Related Party transactions which figures the names of common Directors and the corresponding transactions; therefore the Appellant has failed to satisfy that the transaction in question is a Financial Debt as defined in the Code and a default has occurred. The scope and objective of the IBC is to be cautious in admitting an Application and not encourage recovery proceedings. Appeal dismissed.
Issues Involved:
1. Authorization for initiating CIRP. 2. Genuineness of the Loan Agreement. 3. Discrepancies in the Petition and Demand Notices. 4. Collusive transactions and internal dealings. 5. Definition and existence of Financial Debt. Detailed Analysis: 1. Authorization for Initiating CIRP: The Learned Adjudicating Authority dismissed the application on the ground that the 'Financial Creditor' never authorized the Director to initiate CIRP against the 'Corporate Debtor.' The CIRP was initiated without proper authorization. 2. Genuineness of the Loan Agreement: The Loan Agreement dated 02.12.2015 was questioned due to the disbursement occurring on 07.11.2015, raising doubts about the transaction's genuineness. The Respondent contended that the Loan Agreement was fabricated, as the disbursement date preceded the agreement date. The Appellant argued that the loan was provided till 11.01.2018, reflected in bank statements, and confirmed by the Respondent's accounts for FY 2015-16, 2016-17, and 01.04.2017 to 31.01.2018. 3. Discrepancies in the Petition and Demand Notices: The Petition had inconsistent and inaccurate information, with discrepancies in the Demand Notices issued prior to the actual 'dates of default.' The Appellant issued a Demand Notice on 06.05.2019 and a revised one on 13.05.2019, calling upon the 'Corporate Debtor' to repay the outstanding amount. The Respondent replied on 15.05.2019, declining repayment and terming the borrowing transaction as 'Improper.' 4. Collusive Transactions and Internal Dealings: The Respondent argued that the transactions were collusive, involving circular transactions between the Appellant and 'Satra Group.' The Hon'ble Supreme Court in 'Phoenix ARC Pvt. Ltd. Vs. Spade Financial Services Ltd.' observed that collusive transactions do not constitute 'financial debt.' The Bank Statements reflected maximum transactions with 'Satra Group' entities, indicating internal dealings. The Appellant failed to rebut the Respondent's claims of regular internal transactions with documentary evidence. 5. Definition and Existence of Financial Debt: The Appellant argued that the existence of debt and default should be the primary consideration as per 'M/s. Innoventive Industries' and other judgments. However, the Tribunal noted that the transactions between the parties were not genuine financial debts but collusive in nature. The definition of 'Financial Debt' under Section 5(8) of the Code was not satisfied. The Tribunal emphasized caution in admitting applications under IBC to avoid encouraging recovery proceedings. Conclusion: The Tribunal dismissed the Appeal, confirming the Impugned Order of the Learned Adjudicating Authority. The Appellant failed to prove that the transaction in question was a 'Financial Debt' as defined in the Code. The Tribunal did not delve into the technicalities of authorization or the genuineness of the MOU due to the primary issue of collusive transactions. The Registry was directed to upload the Judgment on the Tribunal's website and send a copy to the Learned Adjudicating Authority.
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