2019 (8) TMI 1783 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditor or not - It is submitted that the amount was deposited as loan without interest and therefore it does not come within clause (a) of Section 5(8) of IBC - consideration of 'time value' for money - HELD THAT - The Adjudicating Authority has noticed that the Legal Notice dated 24.06.2017 was issued by the 1st Respondent addressed to the 'Corporate Debtor' and others intimating the defaults such as non-issue of share, Balance Sheet, Account and confirmation of the share allotment remuneration and non-informing board meeting and the AGM and suppressing the profit of the Company. The details of the Lawyer's notice have also been recorded by the Adjudicating Authority. The 'Corporate Debtor' has accepted the loan liability and in terms of the provisions of law, has been noticed by the Adjudicating Authority - Respondent No. 1 who applied for refund of money was required to be paid interest @ 12% per annum from the expiry of 60 days thereby from 61st day should be treated as debt in default. The record being complete and the Adjudicating Authority being satisfied, admitted the Application under Section 9 of the IBC - Appeal dismissed.

Summary

Issues:
1. Whether the respondent, a shareholder of the corporate debtor, qualifies as a "Financial Creditor" under the Insolvency and Bankruptcy Code, 2016 (IBC).
2. Whether the amount deposited by the respondent constitutes a loan without interest, exempting it from being considered as a financial debt under the IBC.
3. Whether the shares were allotted within the stipulated time frame as per the Companies Act, 2013.
4. Whether the legal notice issued by the respondent regarding defaults by the corporate debtor is valid and substantiated.
5. Whether the application for refund of money by the respondent should be treated as debt in default.

Analysis:
1. The respondent, a shareholder of the corporate debtor, filed an application under Section 7 of the IBC for the initiation of Corporate Insolvency Resolution Process. The Adjudicating Authority admitted the application, leading to the challenge in the present case.
2. The appellant argued that the respondent does not qualify as a "Financial Creditor" under the IBC as the amount was deposited as a loan without interest, not meeting the criteria specified in the IBC. The absence of any claim was highlighted to contest the allegation of default.
3. The respondent claimed to be a financial creditor, stating that the amount disbursed was for the consideration of the time value of money. The Adjudicating Authority noted that the shares were not allotted within the specified time frame as per the Companies Act, 2013.
4. A legal notice was issued by the respondent outlining defaults by the corporate debtor, such as non-issuance of shares and other financial discrepancies. The details of the legal notice were recorded by the Adjudicating Authority.
5. The respondent's application for the refund of money was supported by a claim of outstanding financial debt, including interest. The Adjudicating Authority admitted the application under Section 9 of the IBC, considering the debt in default from the 61st day.

In conclusion, the appellate tribunal dismissed the appeal, upholding the impugned order dated 23rd January, 2019, based on the acceptance of the loan liability by the corporate debtor and the adherence to legal provisions. The respondent's claim of outstanding financial debt was deemed valid, leading to the admission of the application under the IBC.