2017 (9) TMI 1608 - Tri - Companies Law

Corporate insolvency process - cheques dishonored - Held that - We agree with the Adjudicating Authority that proceeding under section 138 of the Negotiable Instrument Act was initiated due to dishonour of cheque and the same cannot be a ground to reject the application under Section 7 of the I&B Code, there being debt and default. The Appellant while referring to letters, money receipts, demand promissory note, other relevant documents, including cheques have taken plea that they have been shown as security towards loan amount paid on different dates as detailed in the appeal. According to the Appellants, pursuant to oral agreement between the parties, the loan amount has been taken and there is no stipulation of any specific date of re-payment. However, it is accepted that payment is due to the financial creditor and cheques presented by the Appellants were dishonoured. One of the plea taken by the Appellants that pursuant to oral understanding/ agreement between the parties, the terms for repayment of the loan was to be renewed/ restructured with effect from 31.3.17 and therefore the question of default in making re-payment does not arise. However, in absence of any such agreement , no such plea be accepted. Submission that Form 1 was not in accordance with the provisions of Section 7 and Rules framed there under cannot be accepted as we find that application under Section 7 was filed by authorized representative of financial creditor , namely, Mr. Chinmoy Guchhait, Director. Next contention that particulars of security etc., were to be given in Part V of Form No. 1, including order of court, if any, but it has not been shown cannot be accepted as the particulars as mentioned therein are not applicable in the present case. For example, if no order has been passed by any Tribunal or Arbitration Panel or any suit is pending, the question of giving details of such case does not arise. The financial creditor rightly mentioned the word not applicable against the relevant column. As we find no illegality in the impugned order and the application preferred by Respondents ( financial creditors ) being in order and complete, the question of interference with the impugned order dated 12th April, 2017 doe arise

Summary

Issues:
Admission of application under Section 7 of the Insolvency & Bankruptcy Code, 2016 based on dishonored cheques and debt default. Validity of the application under Section 7 and compliance with procedural requirements.

Analysis:
The appeal was filed against an order admitting an application under Section 7 of the Insolvency & Bankruptcy Code, 2016 by the Adjudicating Authority. The Respondent, a financial creditor, initiated proceedings under Section 138 of the Negotiable Instruments Act due to dishonored cheques. The Appellant argued that this should be a ground to reject the application. However, the Tribunal agreed with the Adjudicating Authority that the debt and default existed, making the application valid. The Appellant claimed the loan amount was taken with no specific repayment date stipulated, but acknowledged the due payment to the financial creditor. The Appellant's plea that the loan repayment terms were to be renewed was rejected as there was no agreement to support this claim.

The Appellant contended that the Form 1 for the application was not in accordance with Section 7 and related rules. However, the Tribunal found the application was filed by an authorized representative of the financial creditor, meeting the requirements. The Appellant also argued that details of security should have been provided in the form, but the Tribunal deemed it unnecessary as no court orders or pending suits were applicable. The Tribunal concluded that the impugned order was legal, and the application by the financial creditor was proper and complete, leading to the dismissal of the appeal. No costs were awarded in the case due to lack of merit.