2018 (8) TMI 1992 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - There is nothing on record to suggest that after payment of ₹ 50 lacs in the initial stage another sum of ₹ 50 lakhs was paid by the Respondent to make a total amount of ₹ 1 crores. In absence of any evidence of grant of further sum of ₹ 50 lacs, it cannot be treated that a sum of ₹ 1 crore was paid by Navis to the Corporate Debtor - The appellant has made out a case that the default has not occurred in the sense that the debt , which also includes a disputed claim, is not due and is not payable by Corporate Debtor to the Respondent in law as also in fact. As the Adjudicating Authority has failed to notice the aforesaid facts and records are doubtful, in view of the different dates which has been mentioned therein and the 1st Respondent has failed to explain as to how in letter dated 24th October, 2017 reference of agreement of subsequent dated 25th October, 2017 has been given or as to how in the agreement dated 25th October, 2017, amount due as on 5th November, 2017 has been shown, the impugned order cannot be sustained - Impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Sufficiency of material to record satisfaction of default.
2. Reliability of the pledge agreement.
3. Evidence of disbursement of additional amounts.
4. Repayment of the initial loan.
5. Validity of the assignment deed.
6. Financial debt definition under Section 5(8) of the I&B Code.
7. Adjudicating Authority's role in determining debt and default.

Issue-wise Detailed Analysis:

1. Sufficiency of Material to Record Satisfaction of Default:
The appellant challenged the order admitting the application under Section 7 of the Insolvency & Bankruptcy Code, 2016, arguing that the material produced by the respondent was insufficient to record satisfaction of default. The Tribunal examined whether the record was complete and whether there was a debt and default committed by the Corporate Debtor, as per the principles laid down by the Hon’ble Supreme Court in 'Innoventive Industries Ltd Vs ICICI Bank’ (2018) 1 SCC 407.

2. Reliability of the Pledge Agreement:
The appellant contended that the pledge agreement was doubtful and could not be relied upon. The Tribunal noted that the agreement contained acknowledgments of disbursement but also pointed out inconsistencies in the documents provided by the respondent, such as the dates mentioned in the Deed of Assignment and the letter dated 24th October 2017, which referred to an agreement of a subsequent date (25th October 2017).

3. Evidence of Disbursement of Additional Amounts:
The appellant argued that no additional amount of ?50 lakhs was disbursed beyond the initial ?50 lakhs. The Tribunal found that there was no evidence to support the claim of an additional ?50 lakhs being disbursed, making it clear that only the initial ?50 lakhs were involved.

4. Repayment of the Initial Loan:
The appellant provided evidence of repayment of the initial ?50 lakhs through banking channels. The Tribunal acknowledged the repayment and noted that the Corporate Debtor had claimed an additional sum of ?4,27,000 payable by the respondent, which was not disputed by the respondent.

5. Validity of the Assignment Deed:
The Tribunal scrutinized the Deed of Assignment dated 25th October 2017 and found discrepancies, such as the inclusion of dues as of 5th November 2017 in a document dated 25th October 2017. These inconsistencies led the Tribunal to question the validity of the assignment deed.

6. Financial Debt Definition under Section 5(8) of the I&B Code:
The respondent argued that the amount lent constituted a financial debt under Section 5(8) of the I&B Code. However, the Tribunal found that the evidence did not support the claim of an additional ?50 lakhs being lent, and thus, the total amount of ?1 crore was not established.

7. Adjudicating Authority's Role in Determining Debt and Default:
The Tribunal reiterated that the Adjudicating Authority is not required to go into the claim or counterclaim except to determine whether the record is complete and whether there is a debt and default. Based on the evidence, the Tribunal concluded that the default had not occurred in the sense that the debt was not due and payable by the Corporate Debtor in law or in fact.

Conclusion:
The Tribunal set aside the impugned order dated 21st February 2017 passed by the Adjudicating Authority (National Company Law Tribunal), Ahmedabad Bench, Ahmedabad. It declared all subsequent actions, including the appointment of a Resolution Professional and the declaration of moratorium, illegal and set aside. The application under Section 7 of the I&B Code was dismissed, and the Corporate Debtor was allowed to function independently through its Board of Directors. The appeal was allowed with no costs.