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2020 (2) TMI 1503 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - HELD THAT - The Petitioner claimed that he has deposited the amount with the Corporate Debtor and in lieu of that he was getting interest and last interest was paid to him on 31.03.2018 and the TDS on the interest was also deducted by the Corporate Debtor, which is reflected in the ledger account of the Corporate Petitioner submitted that he is the Financial Creditor and amount which he has deposited comes vandler the definition of Financial Debt - the claim of the Petitioner does not come within the purview of Section 5 (8) of the Code and any of the Clause a to i of Section 5(8) of the Code. Mere plain reading of the provisions shows that default means non- payment of debt, in the present case, the amount which the Petitioner deposited does not come under the definition of the debt - though the Petitioner has some other remedy under the law to recover the amount which he has deposited with the Corporate Debtor but so far initiation of the Section 7 of the IBC is concerned the present application is not maintainable. Application dismissed.
Issues Involved:
1. Whether the petitioner's claim qualifies as a "Financial Debt" under Section 5(8) of the Insolvency & Bankruptcy Code, 2016. 2. Whether the deduction of TDS by the Corporate Debtor constitutes an admission of liability. 3. The applicability of Section 7 of the Insolvency & Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP). Issue-wise Detailed Analysis: 1. Whether the petitioner's claim qualifies as a "Financial Debt" under Section 5(8) of the Insolvency & Bankruptcy Code, 2016: The petitioner filed a petition under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking the initiation of the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor due to its inability to liquidate financial debt amounting to INR 21,94,771/-. The petitioner claimed that the amount deposited with the Corporate Debtor, along with accrued interest, qualifies as a financial debt. However, the Tribunal found that the petitioner used the term "deposit" rather than "debt" in the application. The Tribunal referred to the definitions of "Financial Debt," "Financial Creditor," "Debt," and "Claim" as per Sections 5(7), 5(8), 3(6), and 3(11) of the Code. It concluded that the petitioner's claim does not fall within the purview of Section 5(8) of the Code, as the amount deposited does not meet the criteria for being considered a financial debt. 2. Whether the deduction of TDS by the Corporate Debtor constitutes an admission of liability: The petitioner argued that the deduction of TDS on the interest paid to him by the Corporate Debtor indicates an acknowledgment of liability. The Tribunal referred to the decision in Utility Powertech Limited Vs. Amit Traders, where it was held that the deduction of TDS does not constitute an admission of liability. TDS can be deducted based on the estimation of income, and its deduction alone is not sufficient to impose liability. The Tribunal agreed with this view, stating that while TDS deduction reflects the payment of interest, it does not, by itself, transform the deposited amount into a financial debt under the Code. 3. The applicability of Section 7 of the Insolvency & Bankruptcy Code, 2016 for initiating Corporate Insolvency Resolution Process (CIRP): The Tribunal examined whether the petitioner's application under Section 7 of the Code is maintainable. It referred to the definition of "default" under Section 3(12) of the Code, which means non-payment of debt when it becomes due and payable. Since the Tribunal had already determined that the petitioner's claim does not qualify as a financial debt, it concluded that there is no default in payment of debt as defined under the Code. Consequently, the petitioner's application under Section 7 for initiating CIRP was deemed not maintainable. Conclusion: The Tribunal dismissed the petitioner's application under Section 7 of the Insolvency & Bankruptcy Code, 2016, stating that the claim does not qualify as a financial debt under the Code. The petitioner was advised to seek remedy under Chapter V of the Companies Act, 2013, read with the Company (Acceptance of Deposits) Rules, 2014, for the recovery of the deposited amount.
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