2019 (12) TMI 1459 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor - NBFC - financial creditor proves the financial debt against the corporate debtor on the basis of transaction as disclosed or not - Commitment of default or not - HELD THAT - Admittedly the financial creditor is a non-banking financial company. Hence, the transaction in dispute cannot be a transaction of simple corporate deposit in between two companies. Here in this case, the financial creditor alleges to have given the loan to the corporate debtor. Obviously, when any NBFC gives loan to an individual or for that matter any corporate person, it may require to follow certain rules of business. In this case, the financial creditor did not disclose in its application, more particular in Part V of the application, by giving details as to when the corporate debtor made application for loan, when it was granted. The financial creditor did not produce on record the document to show that loan was really granted as per the request of the corporate debtor. In Form V of the application, he did not state all relevant facts - the financial creditor did not disclose the document to establish its claim of loan disbursement. It has relied on only one document that is xerox copy of the statement of account issued by HDFC Bank (annexure 6) to show that amount of ₹ 25 lakhs was transferred to the account of corporate debtor by way of RTGS. The corporate debtor has come out with the clear defence that they have paid the entire amount and nothing is due and payable. In such situation, it was expected from the financial creditor to explain as to what happened to earlier cheque of the corporate debtor - It is now well-settled that this authority cannot act as a recovery Tribunal. The financial creditor did not produce required documents to show that they received the application from the corporate debtor requesting the loan. The documents showing that the so-called application was duly processed by them and later on it was granted. The financial creditor did not produce the document showing that thereafter they issued in favour of the corporate debtor the letter informing that the loan proposal is granted as requested, etc. The corporate debtor come out with clear defence that financial creditor owes nothing against them. They filed interpleader suit disclosing the nature of alleged transaction. It cannot be said that their contention in the suit may be correct but competent civil court having felt that there exists prima facie case in favour of the corporate debtor have issued and an interim prohibitory order against financial creditor and others stating they cannot recover the amount claimed herein - this Authority is not a forum for a recovery of amount. The corporate debtor has explained the nature of transaction and financial creditor did not produce adequate evidence to prove that it owns financial debt against the corporate debtor. In this summary enquiry, the correctness of assertion of financial creditor and defence of the financial creditor cannot be entered into - the evidence as produced by the financial creditor is not enough and cannot be safely relied on. The corporate debtor is a solvent company. Generally, solvent company will not take a risk to go into CIRP for non-payment of ₹ 25 lakhs. From evidence on record, it is held that the financial creditor may not owe financial debt as claimed by them in their application. Hence, there is no question of any default by the corporate debtor - petition dismissed.

Summary

Issues Involved:
1. Whether the financial creditor proves the financial debt against the corporate debtor on the basis of the disclosed transaction?
2. Whether the corporate debtor committed default in paying the same?

Analysis:

Issue 1:
The financial creditor, a non-banking financial company, alleged lending ?25 lakhs to the corporate debtor for 90 days at 15% interest. However, crucial details regarding the loan disbursement were missing in the application. The creditor failed to produce sufficient evidence to establish the loan grant, and discrepancies were noted in the documents submitted, raising doubts about the account ownership and the validity of the cheques. The financial creditor did not meet the requirements of Section 7(3)(a) of the IBC, failing to prove the debt adequately. In contrast, the corporate debtor presented a strong defense, including a pending interpleader suit and an interim order from the civil court, indicating a prima facie case in their favor. The Tribunal emphasized that it is not a recovery forum and concluded that the evidence provided by the financial creditor was insufficient and unreliable. The corporate debtor's financial position, as evidenced by its balance sheet, further supported the finding that it was a solvent company, casting doubt on the creditor's claim.

Issue 2:
The corporate debtor vehemently denied the debt claim, asserting that the amount had been settled in a long transaction between the parties. The debtor's defense, supported by legal proceedings and financial records, contradicted the creditor's allegations of default. The Tribunal noted that the creditor failed to address key questions regarding the earlier cheques issued by the debtor and the validity of the claimed debt. Without concrete evidence of default and with the debtor's strong defense, the Tribunal ruled in favor of the corporate debtor, rejecting the petition to initiate the CIRP. The decision highlighted the importance of substantial evidence and compliance with legal requirements in establishing financial debts in insolvency cases.

In conclusion, the Tribunal dismissed the petition, emphasizing the insufficiency of evidence provided by the financial creditor and the lack of proof of default by the corporate debtor. The detailed analysis of the transaction, legal defenses, and documentary evidence led to the decision to reject the application under Section 7 of the Insolvency and Bankruptcy Code, 2016.