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2019 (5) TMI 1896 - AT - Insolvency and BankruptcyRejection of proceedings u/s 7 proceedings under Insolvency and Bankruptcy Code, 2016 - post-dated cheques had been issued by the Respondent which bounced and criminal complaints were filed under Section 138 of the Negotiable Instruments Act - HELD THAT - It would be totally inappropriate on the part of the Adjudicating Authority to shut its eyes to the Agreement dated 15.06.2018 and to have thrown out all the claims of the Appellant on the basis that reference to the earlier rejection of the Company Petition 122/2018 had not been made. When the Petition was filed based on the subsequent agreement, such stand on the part of the Adjudicating Authority cannot be maintained. The Respondent has even in the Reply (Diary No.10319) accepted entering into this fresh agreement dated 15th June, 2018. The Application under Section 7 of I B Code could not have been rejected on such grounds as mentioned by the Adjudicating Authority. Nothing else is pointed out to question the Form submitted. Form submitted under Section 7 of I B Code being complete, the same should have been admitted. The matter is remitted back to the Adjudicating Authority - appeal allowed by way of remand.
Issues:
1. Rejection of Section 7 proceedings under Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority. 2. Disputed debt due from the Respondent. 3. Failure to prove as a Financial Creditor. 4. Rejection of the Application under Section 7 by the Adjudicating Authority. 5. Consideration of subsequent agreement dated 15th June, 2018. 6. Adjudicating Authority's refusal to admit the Section 7 proceeding based on the subsequent agreement. 7. Appeal against the Impugned Order. Analysis: 1. The Appeal was filed by M/s. Ludhiana Scrips Private Limited, a Financial Creditor, against the rejection of Section 7 proceedings under the Insolvency and Bankruptcy Code, 2016 by the Adjudicating Authority. The Appellant claimed a debt from the Respondent, K.C. Land and Finance Limited, based on an inter corporate loan and default in payment. 2. The Appellant had provided funds to the Respondent through inter corporate loans, leading to bounced post-dated cheques and legal actions. Despite a settlement agreement in 2017 for payment of a substantial amount, a significant balance remained unpaid. Subsequent legal actions were taken by the Appellant, including the filing of CP(IB)332/Chd/PB/2018. 3. The Adjudicating Authority had previously rejected the Appellant's claim to be a Financial Creditor in a prior case. The rejection was based on the lack of evidence regarding interest debiting in the Respondent's accounts and the absence of financial entries related to the loan disbursal. 4. The Adjudicating Authority, in the present case, refused to consider the subsequent agreement dated 15th June, 2018, between the parties, citing the earlier rejection of a petition based on a similar transaction. The Authority imposed exemplary costs on the Appellant for attempting to revive an old claim through a new agreement. 5. The Appellate Tribunal, after hearing both sides, found that the subsequent agreement clarified the financial transaction and debt owed by the Respondent to the Appellant. The Tribunal criticized the Adjudicating Authority for disregarding the new agreement and ordered the admission of the Section 7 proceeding under the I&B Code. 6. The Tribunal set aside the Impugned Order and remitted the matter back to the Adjudicating Authority for further proceedings in line with the I&B Code. The Respondent was given the opportunity to settle the matter, and the Appeal was allowed with the mentioned observations and directions.
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