2019 (12) TMI 566 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Section 7 of the Insolvency and Bankruptcy Code 2016 - amount due and payable - Whether an amount of ₹ 1,29,50,000/- paid by the petitioner to the Respondent Company is a financial debt? - HELD THAT - The Petitioner in his petition pleaded that the loan was advanced as an understanding between him and the Corporate Debtor and its Managing Director, who happened to be his nephew and that the loan was payable on demand. It is nowhere pleaded that such understanding included the payment of interest against the loan and the rate thereof. There is also no pleading that the payment was made against the issue of shares at a future date. The advancement of the said loan accordingly is not covered under any of the clauses of the definition. There is also no material on record to show that the amount was disbursed against the consideration for the time value of the money - Taking all these aspects into consideration it is accordingly clear, for the purpose of this case, that the amount would not come within the definition of a financial debt, though it is admitted that the petitioner had advanced this amount to meet the fund requirements of the Company - answered in the negative. Whether the Respondent had committed default in paying the said amount? - HELD THAT - The Respondent Company had not paid back the amount to the petitioner. More so when the payment of ₹ 5 lakhs is not admitted against the loan amount but against an independent unsecured loan. In that view of the matter it is to be held that there has been a default by the Respondent in repayment of the debt, though not financial - issue answered in affirmative. Whether the amount is due and payable to the petitioner? - HELD THAT - The Application under Section 7 of the IBC is not a suit. Suits relating to money needs to be filed within three years when the amount became due. In the instant case admittedly, there was no time limit agreed upon between the parties for repayment of the amount advanced. The amount payable on demand pleaded by the petitioner could not be extended for an uncertain period. In the absence of any contract between parties the amount needed to be repaid within three years from the date when they were respectively advanced. The amounts accordingly would have been due and payable on or before 14.12.2010, 10.02.2011 and 25.03.2011 respectively. There is no material on record that the Respondent made any admission of debt respectively within these periods or subsequent thereso - Application having been filed only on 13.11.2018 was grossly time barred. The debt accordingly was not due and payable - issue is answered in the negative. Petition not maintainable - petition thus cannot be admitted.

Summary

Issues Involved:
1. Whether an amount of ?1,29,50,000/- paid by the petitioner to the Respondent Company is a financial debt.
2. Whether the Respondent had committed default in paying the said amount.
3. Whether the amount is due and payable to the petitioner.
4. To what relief(s) the petitioner is entitled.

Issue-Wise Detailed Analysis:

Issue No. I: Whether an amount of ?1,29,50,000/- paid by the petitioner to the Respondent Company is a financial debt.

The petitioner advanced ?1,29,50,000/- to the Respondent Company via cheques dated 15.12.2007, 11.02.2008, and 26.03.2008. The Respondent admitted receiving these amounts but claimed that the petitioner authorized the transfer of these funds to the account of the then Managing Director, K. Vijay Kumar, in full settlement of dues. The petitioner denied issuing such authorization.

Under Section 5(8) of the Insolvency and Bankruptcy Code (IBC), a financial debt is defined as a debt along with interest, if any, disbursed against the consideration for the time value of money. The petitioner did not plead that there was an understanding for the payment of interest on the loan or that the loan was advanced against the issuance of shares. Consequently, the Tribunal concluded that the amount did not qualify as a financial debt under the IBC. Issue No. I was answered in the negative.

Issue No. II: Whether the Respondent had committed default in paying the said amount.

The Tribunal found no evidence that the Respondent Company transferred the loan amount to the account of K. Vijay Kumar in 2008, as claimed. The Respondent's argument that ?5,00,000/- paid on 29.06.2016 was against an unsecured loan taken in 2013 was not substantiated by the petitioner's records. Therefore, the Tribunal held that the Respondent Company had defaulted in repaying the debt, although it was not classified as a financial debt. Issue No. II was answered in the affirmative.

Issue No. III: Whether the amount is due and payable to the petitioner.

The Tribunal noted that the first payment was made on 15.12.2007 and the last on 26.03.2008, with an understanding that the loan was payable on demand. According to the Limitation Act, the right to sue accrues when a default occurs, and the application under Section 7 of the IBC must be filed within three years from the date of default. Since the application was filed on 13.11.2018, the Tribunal held that it was time-barred. Consequently, the debt was not due and payable. Issue No. III was answered in the negative.

Issue No. IV: To what relief(s) the petitioner is entitled.

Given the findings on the previous issues, the Tribunal concluded that the petitioner was not entitled to the relief sought. The petition was not maintainable under the IBC and was thus liable to be rejected. The petition was dismissed accordingly.