2021 (2) TMI 1216 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - privity of contract or not - HELD THAT - The unregistered Memorandum of Understanding (MoU) dated 05.07.2019 is rejected. The Applicant has also filed Deed of Mortgage dated 20.10.2015 registered as document No. 3034/2015 on the file of the Sub-Registrar, Srirangam executed between Mr. A. Francis in his individual capacity and the Applicant herein. In this registered Deed of Mortgage, the said Mr. A. Francis has mortgaged his individual property as a security to the loan availed by him from the applicant. It is clearly mentioned that Mr. A. Francis has obtained loan and towards that loan he has offered his property as mortgage to the applicant herein. There is no Privity of Contract between the applicant and the Corporate Debtor. The Applicant failed to satisfy this Adjudicating Authority regarding disbursement of loan into the accounts of the Corporate Debtor. The loan alleged to have been availed by the Corporate Debtor is not reflected in the statement of accounts filed along with the application. The entire transaction was on 20.10.2015. The argument of counsel for Applicant solely relies on the unregistered Memorandum of Understanding (MoU) dated 05.07.2019 wherein he states that since the Corporate Debtor has executed the above MoU, the Corporate Debtor owes a total outstanding amount of ₹ 1,00,00,000/- to the Applicant and 4 other creditors. However, proof of payment/disbursement into the account of the Corporate Debtor has not been submitted by the applicant. Further, no interest has been serviced from the accounts of the Corporate Debtor. It is clear that the Applicant has failed to prove debt and default. Application dismissed.

Summary

Issues Involved:
Application under Section 7 of the Insolvency and Bankruptcy Code 2016 for initiating Corporate Insolvency Resolution Process (CIRP) against a Corporate Debtor based on outstanding debt and default.

Analysis:

1. Debt and Default Allegations:
The Financial Creditor filed an application under Section 7 alleging that the Corporate Debtor failed to repay a loan of ?50,00,000/- with interest, resulting in a total outstanding debt of ?76,53,969.10. The default date was claimed to be 19.08.2019 based on an unregistered Memorandum of Understanding (MoU) dated 05.07.2019. The Respondent, however, contended that the loan was availed by the Managing Director personally, not by the Corporate Debtor, and there was no evidence of the loan amount being transferred to the Corporate Debtor's account.

2. Examination of Documents:
The Tribunal examined the bank statements submitted by the Applicant, which showed transactions between the Applicant and the Managing Director in his individual capacity, not the Corporate Debtor. The Applicant failed to provide evidence of the loan being disbursed to the Corporate Debtor's account, as required to establish debt and default for admission under Section 7.

3. Rejection of Memorandum of Understanding (MoU):
The Tribunal rejected the unregistered MoU dated 05.07.2019 as it lacked proof of the loan amount being transferred to the Corporate Debtor. Additionally, a Deed of Mortgage registered between the Managing Director and the Applicant further indicated the absence of a direct contractual relationship between the Applicant and the Corporate Debtor.

4. Lack of Evidence of Debt and Default:
Despite the Applicant's reliance on the MoU to claim a total outstanding amount of ?1,00,00,000/-, the Tribunal emphasized the lack of evidence supporting the transfer of funds to the Corporate Debtor's account. The absence of interest payments from the Corporate Debtor's accounts further weakened the Applicant's case in establishing debt and default.

5. Dismissal of Application:
Based on the above analysis, the Tribunal dismissed the application under Section 7 for failing to prove debt and default required for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor. The Applicant was unable to substantiate the claim of outstanding debt owed by the Corporate Debtor, leading to the dismissal of the application without costs.