2022 (6) TMI 1289 - Tri - Insolvency and Bankruptcy

Maintainability of petition - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - composite commercial transactions - existence of debt and dispute or not - contractual default or not - time limitation - HELD THAT - As per the enunciation of law by the Hon'ble Apex Court in M/s. Innoventive Industries Ltd. vs. ICICI Bank Anr. 2017 (9) TMI 58 - SUPREME COURT , in an Application under Section 7 of the IBC, 2016, what is required to be seen by this Adjudicating Authority, is whether the application filed within the period of limitation and whether the Petitioner/Financial Creditor proved the debt and default thereon. It is the settled principle of law that the amount given under an Inter Corporate Deposit is a financial debt. The Learned Counsel appearing for the Respondent/Corporate Debtor while not disputing the said principle, however, mainly contended that the subject Inter Corporate Deposit was given by the Petitioner/Financial Creditor to the Respondent/Corporate Debtor as a part of the investment made and hence it cannot be treated as a financial debt and the C.P. should be dismissed - There are force in the submissions made by the Learned Senior Counsel appearing for the Petitioner/Financial Creditor. The Memorandum of Understanding dated 07.01.2012, on which the Respondent placed reliance was admittedly executed between the Petitioner and a separate legal entity known as M/s. Lepakshi Knowledge Hub Private Limited. Further, the amount received by the Respondent/Corporate Debtor under the subject Inter Corporate Deposit dated 19.03.2012 was not for purchasing of any shares by the Petitioner in the Respondent Company. On the other hand, it was for meeting certain expenses by the Respondent/Corporate Debtor. Hence, the contention of the Petitioner in this regard is rejected. The Petitioner/Financial Creditor is able to prove the debt and default by placing reliance on various documents enclosed to the instant company petition. Time Limitation - HELD THAT - The instant C.P. was filed on 13.10.2021. The Corporate Debtor/Respondent has acknowledged the receipt of Rs. 5,00,00,000/- from the Financial Creditors/Petitioners in its Balance Sheets from the Financial Years 2011-2012 to 2018-2019. Hence the C.P. is well within the period of limitation. The application filed in the prescribed Form No. 1 is found to be complete - Application admitted - moratorium declared.

Summary

Issues Involved:
1. Whether the Inter Corporate Deposit (ICD) constitutes a financial debt under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016.
2. Whether the application is filed within the period of limitation.
3. Whether the pending arbitration proceedings affect the initiation of the Corporate Insolvency Resolution Process (CIRP).
4. Whether the petition is an abuse of process attracting penalty under Section 65 of IBC.

Detailed Analysis:

1. Whether the Inter Corporate Deposit (ICD) constitutes a financial debt under Section 7 of the Insolvency and Bankruptcy Code (IBC), 2016:
The Petitioner, M/s. Global Emerging Markets India Limited, filed a petition under Section 7 of the IBC to initiate CIRP against the Respondent, M/s. Lepakshi Science and Technology Park Private Limited. The amount claimed to be in default is Rs. 25,84,94,000/-. The Respondent argued that the ICD was part of an investment scheme and not an independent financial debt. However, the Tribunal found that the ICD was an independent transaction, not linked to the Memorandum of Understanding (MOU) dated 07.01.2012, which was executed between the Petitioner and a separate entity, M/s. Lepakshi Knowledge Hub Private Limited. The Tribunal held that the amount given under an ICD is a financial debt, and the execution and transfer of money under the ICD were not in dispute.

2. Whether the application is filed within the period of limitation:
The ICD was executed on 19.03.2012 with a tenure of six months, interest-free during this term. If not repaid within this period, the Corporate Debtor was to repay Rs. 5,00,00,000/- along with 18% interest per annum. The Petitioner recalled the ICD on 19.09.2020, and the petition was filed on 13.10.2021. The Respondent acknowledged the debt in its Balance Sheets from 2011-2012 to 2018-2019. Therefore, the Tribunal found the petition to be within the period of limitation.

3. Whether the pending arbitration proceedings affect the initiation of the Corporate Insolvency Resolution Process (CIRP):
The Respondent contended that the existence of arbitration proceedings and other litigations preclude the initiation of CIRP. The Tribunal rejected this contention, stating that pending arbitration proceedings have no relevance to the application under Section 7 of the IBC. The Tribunal emphasized that the existence of a financial debt and default are the primary considerations for admitting a Section 7 petition.

4. Whether the petition is an abuse of process attracting penalty under Section 65 of IBC:
The Respondent argued that the petition is a sheer abuse of process and should attract a penalty under Section 65 of IBC. The Tribunal found no merit in this argument, as the Petitioner was able to prove the debt and default through various documents. The Tribunal did not find any evidence to suggest that the petition was filed with malicious intent or to arm-twist the Respondent.

Conclusion:
The Tribunal admitted the petition under Section 7 of the IBC, 2016, and declared a moratorium as per Section 14 of the Code. The Tribunal appointed Shri Hemendra Paliwal as the Interim Resolution Professional (IRP) and directed him to take necessary steps under the IBC. The Tribunal found that the petition was complete and within the period of limitation, and that the ICD constituted a financial debt. The pending arbitration proceedings did not affect the initiation of CIRP, and there was no abuse of process warranting a penalty under Section 65 of IBC.