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2019 (7) TMI 1818 - Tri - Insolvency and BankruptcyAdmission of claim of the Applicant as mentioned in FORM-C - reconstitution of Committee of Creditors - Jurisdiction of Authorized Representative/ Power Agent to argue on behalf of the Applicant - non-filing of the income tax return by the Applicant - re-payment of the loan advanced - non-compliance with FED master direction No. 6/2015-16 dated January I, 2016 issued by the Reserve Bank of India - absence of entry in the Books of Account of the Corporate Debtor. Whether the Authorized Representative/ Power Agent is legally entitled to argue on behalf of the Applicant? - HELD THAT - On co-joint reading of the provisions of Section 432 of the Companies Act, 2013 and Rule 45 of the National Company Law Tribunal, Rules 2016 r/ w. , Section 32 of the Advocate Act, 1961 there does not appear any bar against the Authorized Representative/ Power Agent to argue the case of the Applicant/ Principal. The Authorized Representative/ Power Agent is duly authorized in writing in this behalf by the Applicant / principal and he has knowledge of law and already argued his personal cases well before this bench - this Authority has permitted the Authorized Representative/Power Agent viz., Mr. Gagan Bothra to argue the case of the Applicant/ principal. Accordingly, the issue No. i, is decided in favour of the Applicant against the Respondent. Whether the non-filing of the income tax return by the Applicant disentitles him to claim the re-payment of the loan advanced? - HELD THAT - The Corporate Debtor after availing the loan, cannot take the plea that the Applicant has not produced any income tax return to demonstrate the source of loan. In this connection this authority also relies upon on the judgment given by Hon ble High Court of Madhya Pradesh, delivered on 07.03.2019 in SHRIMATI RAGINI GUPTA VERSUS PIYUSH DUTT SHARMA 2019 (4) TMI 114 - MADHYA PRADESH HIGH COURT . In the light Of the above, the plea taken by the Corporate Debtor stands rejected and the issue is decided in favour of the Applicant. Whether the non-compliance with FED master direction No. 6/2015-16 dated January I, 2016 issued by the Reserve Bank of India annuls the loan transactions between the Applicant and Corporate Debtor? - HELD THAT - There is no violation of the Foreign Exchange Management Act, 1999 read with Foreign Exchange Management (borrowing and lending in Rupees) Regulations, 2000 notified vide notification no. FEMA 4/2000-RB dated May 3, 2000, and the FED Master Direction No. 6/2015-16 dated 01.01.2016 as is contended by learned Sr. counsel for the Resolution Professional/ Corporate Debtor. Even if, it is assumed that there is violation of said direction, the transactions do not become void, the non- compliance with the direction will entail penalty, if any. It is important to note that the loan transactions took place between the Applicant and the Corporate Debtor with effect from 05.03.2014 to 21.02.2017 and the Corporate Debtor had never raised any issue of such violation with the Applicant. Further, it is necessary to place on record that the Corporate Debtor has not pleaded anything in its counter with regard to the violation of the Foreign Exchange Management Act. In view of the discussion made, the cash transactions between the Applicant and the Corporate Debtor do not involve any violation of FED master direction No. 6/2015-16 dated January 1, 2016 issued by the Reserve Bank of India - the issue stands decided in favour of Applicant and against the Respondent. Whether the claim of the Applicant based on acknowledgment/ confirmation letter and pro-note, both dated 21.02.2017 and cheque dated 12.06.2017 is admissible in the absence of entry in the Books of Account of the Corporate Debtor? - HELD THAT - The Corporate Debtor has not been maintaining the accounts properly, for which the Applicant cannot be made liable, as the same pertains to the internal management of the Respondent/ Corporate Debtor. Therefore, the absence of any entry in the Books of Account of the Corporate Debtor, about the loan taken from the Applicant, cannot be a valid ground for rejection of the claim of the Applicant, in the face of the bulk of the documentary evidence, i.e., loan confirmation letter, pro- note and Cheque including Cash Book produced by the Applicant, to substantiate his claim - all the directors of the Board had consented to the borrowings of the loan from the Applicant and the loan confirmation letter has been signed by the managing director viz., Senthil kumar, having affixed the seal of the Corporate Debtor that leaves no doubt, that he (the director) has due authority to represent the Corporate Debtor. Therefore, the plea raised by the Corporate Debtor with regard to the Board resolution for obtaining loan from the Applicant is misdirected, the same stands rejected. This authority takes judicial notice that during the pendency of this Application, the Resolution Plan came to be approved by the COC, which has been filed before this Authority under Section 30(6) read with Section 31(1) of the IBC, 2016. In view of this order, the Resolution Professional is directed as follows - a). to treat the Applicant at par with other unsecured financial creditors and make the appropriate provision for payment to which he is entitled, in consultation with the COC and the Resolution Applicant, and file the supplementary affidavit to that effect before this authority, or b). to withdraw the Resolution Plan and constitute the COC afresh to get the Resolution Plan(s) approved with suitable modifications, as may be required. Application disposed off.
Issues Involved:
i. Whether the Authorized Representative/ Power Agent is legally entitled to argue on behalf of the Applicant? ii. Whether the non-filing of the income tax return by the Applicant disentitles him to claim the re-payment of the loan advanced? iii. Whether the non-compliance with FED master direction No. 6/2015-16 dated January 1, 2016 issued by the Reserve Bank of India annuls the loan transactions between the Applicant and Corporate Debtor? iv. Whether the claim of the Applicant based on acknowledgment/ confirmation letter and pro-note, both dated 21.02.2017 and cheque dated 12.06.2017 is admissible in the absence of entry in the Books of Account of the Corporate Debtor? Issue-wise Analysis: i. Whether the Authorized Representative/ Power Agent is legally entitled to argue on behalf of the Applicant? The Respondent argued that the Authorized Representative/ Power Agent is not legally entitled to argue unless enrolled as an advocate, citing a judgment of the Hon'ble High Court of Madras in K. Anand vs Debt Recovery Appellate Tribunal. However, the Applicant's representative referred to Section 432 of the Companies Act, 2013, and Rule 45 of the National Company Law Tribunal, Rules 2016, which allow any person duly authorized in writing to represent a party. Additionally, Section 32 of the Advocates Act, 1961, permits any person not enrolled as an advocate to appear in particular cases if permitted by the court. The Tribunal concluded that there is no bar against the Authorized Representative/ Power Agent arguing the case and decided the issue in favor of the Applicant. ii. Whether the non-filing of the income tax return by the Applicant disentitles him to claim the re-payment of the loan advanced? The Respondent contended that the Applicant should have shown the loan amount in his Income Tax Return. The Tribunal noted that the Applicant relied on a loan confirmation letter, pro-note, cheque, and Cash Register/Cash Book as documentary proof. Citing a similar case from the Hon'ble High Court of Madras, the Tribunal held that the Corporate Debtor cannot refuse repayment on the grounds of the Applicant not disclosing the loan in his tax returns. The issue was decided in favor of the Applicant. iii. Whether the non-compliance with FED master direction No. 6/2015-16 dated January 1, 2016 issued by the Reserve Bank of India annuls the loan transactions between the Applicant and Corporate Debtor? The Respondent argued that the Applicant, being a Non-resident Indian, could not lend money in cash to an Indian company, citing the RBI's Master Direction No. 6/2015-16. However, the Tribunal found that the Applicant is a resident of Pondicherry and the transactions were made in cash, confirmed by the Corporate Debtor. There was no evidence of money being brought from abroad, hence no violation of the Foreign Exchange Management Act. The Tribunal concluded that any non-compliance with the direction would entail a penalty but does not void the transactions. The issue was decided in favor of the Applicant. iv. Whether the claim of the Applicant based on acknowledgment/ confirmation letter and pro-note, both dated 21.02.2017 and cheque dated 12.06.2017 is admissible in the absence of entry in the Books of Account of the Corporate Debtor? The Respondent argued that there was no document substantiating the Applicant's claim, and the Corporate Debtor's accounts did not reflect the loan. The Tribunal noted that the Corporate Debtor had not maintained its accounts properly, as admitted by the Resolution Professional. The absence of entries in the Corporate Debtor's books cannot invalidate the Applicant's claim, supported by substantial documentary evidence, including a loan confirmation letter, pro-note, cheque, and Cash Book. The Tribunal also noted statutory presumptions under Section 139 of the Negotiable Instrument Act, 1881, favoring the Applicant. The issue was decided in favor of the Applicant. Conclusion: The Tribunal allowed the Applicant's claim, setting aside the rejection orders dated 17.09.2018 and 30.04.2019. The Applicant is entitled to repayment of ?3,00,00,000 (Three Crores) with interest at 24% per annum from 21.02.2017 until the approval of the Resolution Plan on 24.06.2019. The Resolution Professional is directed to treat the Applicant at par with other unsecured financial creditors and make appropriate provisions for payment or reconstitute the Committee of Creditors to approve a modified Resolution Plan. The application was disposed of with no order as to costs.
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