2019 (4) TMI 1356 - Tri - Insolvency and Bankruptcy

Initiation of Corporate Insolvency Resolution Process - financial creditor - proof of enforceable debts - Section 7 of the Insolvency Bankruptcy Code, 2016 read with Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 - Corporate Debtor - it was alleged that an amount of ₹ 35,00,000.00 only is the outstanding amount due from the respondent/corporate debtor with interest @15% per annum as on 30-10-2017 and that the respondent/corporate debtor has failed in repayment of the said amount. Whether the petitioner/financial creditor succeeds in establishing a legally enforceable debt is due from the respondent/corporate debtor to the petitioner/financial creditor as alleged? If so, whether the claim is barred by law of limitation? - HELD THAT - The FC in the case in hand is not a money-lender registered under the provisions of the Assam Money Lenders Act, 1934 (Assam Act IV of 1934). According to the ld. Counsel for the FC the FC is an individual and lending money to friends not in the courses of a business is exempted from the purview of the said Act and hence no registration is required and hence lending money is legal and proper. However none of the provisions of the Act brought to my notice to uphold the submission of the ld. Counsel for the FC I am taking judicial notice of filing three similar applications under section 7 of the I B Code by the very same petitioner alleging lending money before this Bench. Sections 18 and 19 of the Limitation Act can apply only in cases of acknowledgment made within the period of limitation. The cheque cannot be considered as proof of payment as per section 19 of the Limitation Act. In view of the above said discussion I am also coming to a conclusion that the claim of the FC if any found sustainable, is barred by limitation. Whether the dishonour of cheque amount to be a default in repayment of a loan as per S. 3(12) of the I B Code? If so whether the cheque return memo can be a proof of record of default as alleged by the financial creditor? - HELD THAT - A dishonour memo cannot be taken as a proof of default in the peculiar nature and circumstances of the case in hand. Therefore, the FC also failed in proving the default in repayment of the loan as alleged by the FC - the application filed under section is liable to be dismissed. Application dismissed.

Summary

Issues Involved:
1. Legally enforceable debt and limitation period.
2. Dishonour of cheque as default and proof of record of default.
3. Reliefs and costs.

Issue-Wise Detailed Analysis:

1. Legally Enforceable Debt and Limitation Period:
The petitioner, a financial creditor, claimed that the corporate debtor owed him ?35,00,000 with interest at 15% per annum, disbursed on 01-11-2016. The petitioner provided a letter (Annexure A) from a director of the corporate debtor acknowledging receipt of the loan. However, the corporate debtor denied receiving the loan and contended that no valid debt existed. The tribunal found that Annexure A lacked the corporate debtor's seal and board resolution, making it insufficient proof of debt. Additionally, the petitioner was not a registered money-lender under the Assam Money Lenders Act, 1934, making the transaction illegal. The tribunal also noted that the original loan of ?50,00,000 was partly repaid, and the remaining amount was time-barred as per the Limitation Act, 1963. Thus, the claim was barred by limitation.

2. Dishonour of Cheque as Default and Proof of Record of Default:
The petitioner argued that the dishonour of a cheque issued by the corporate debtor's director constituted a default. The cheque, dated 30-10-2017, was dishonoured, and the petitioner used this date as the default date. However, the tribunal held that the cheque was undated initially, and the petitioner filled in the date to suit his convenience, which could not be legally recognized. The tribunal referred to a judgment by the Madras High Court, which stated that filling an undated cheque beyond the statutory period of limitation was not permissible. Consequently, the dishonour memo could not be considered proof of default.

3. Reliefs and Costs:
Given the findings on the first two issues, the tribunal dismissed the petitioner's application under Section 7 of the Insolvency and Bankruptcy Code, 2016. The tribunal concluded that the petitioner failed to prove a legally enforceable debt and default. No order as to costs was made.