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2020 (7) TMI 207 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - existence of debt and dispute or not - HELD THAT - It is incumbent upon the Financial Creditor while filing this Application to place on record before this Authority, the 'Financial Contract' and demonstrate without any ambiguity from the financial contract, the amount disbursed as per the loan/debt, the tenure of the loan/debt, the interest payable and the conditions of repayment - In the present case, it is evident that the Financial Creditor has not placed on record any Financial Contract or any Financial Agreement, in pursuance of which the loan was disbursed to the Corporate Debtor. As to the aspect of whether any default being committed by the Corporate Debtor, the Financial Creditor contended that in view of the amount being disbursed which is reflected in the books of the Corporate Debtor, the same becomes repayable on demand with interest and the said amount not being paid by the Corporate Debtor, a default has arisen as contemplated under section 3(12) of the I B Code, 2016. In the absence of any 'Financial Contract' between the parties, this Authority is not able to ascertain the default on the part of the Corporate Debtor - Application dismissed.
Issues Involved:
1. Initiation of Corporate Insolvency Resolution Process (CIRP) under section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC, 2016). 2. Existence of Financial Debt and Default. 3. Requirement of Financial Contract. 4. Allegations of misuse of security documents by the Financial Creditor. Issue-wise Detailed Analysis: 1. Initiation of Corporate Insolvency Resolution Process (CIRP) under section 7 of the Insolvency & Bankruptcy Code, 2016 (IBC, 2016): The application was filed by the Financial Creditor under section 7 of the IBC, 2016 for initiating CIRP against the Corporate Debtor. The Financial Creditor sought to recover a sum of ?21,58,719/- claimed to have arisen from a loan provided to the Corporate Debtor. The application included necessary details such as particulars of the Corporate Debtor, proposed Interim Resolution Professional, and evidence of default. 2. Existence of Financial Debt and Default: The Financial Creditor claimed that the Corporate Debtor had borrowed ?25,00,000/- in December 2015, with an understanding to repay in equal monthly installments. The Corporate Debtor partially repaid the loan but defaulted from August 2016 onwards. The Financial Creditor attempted to encash a security cheque issued by the Corporate Debtor, which bounced due to "payment stopped by drawer." The Corporate Debtor, however, contended that it had repaid a different loan amount of ?6,05,00,000/- to another entity, M/s. Jineshwar Infraventures (P.) Ltd., and alleged misuse of blank cheques and promissory notes provided as security. 3. Requirement of Financial Contract: The Tribunal emphasized the necessity of a 'Financial Contract' as per Rule 4 of the IBBI (Application to Adjudicating Authority) Rules, 2016 and Regulation 8 of the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. The Financial Creditor failed to provide any Financial Contract or Agreement that clearly outlined the terms of the loan, tenure, interest payable, and conditions of repayment. The Tribunal noted that without such a contract, it could not ascertain the existence of a financial debt or default. 4. Allegations of misuse of security documents by the Financial Creditor: The Corporate Debtor alleged that the Financial Creditor, in collusion with M/s. Jineshwar Infraventures (P.) Ltd., misused the blank cheques and promissory notes provided as security. The Corporate Debtor had filed a Civil Suit (OS No. 4759/2016) seeking the return of these documents and to restrain their misuse. The Tribunal acknowledged these allegations but focused on the lack of a Financial Contract to substantiate the Financial Creditor's claims. Conclusion: The Tribunal concluded that the Financial Creditor failed to demonstrate the existence of a 'Financial Contract' and thus could not substantiate the claim of default. Citing the case of Prayag Polytech (P.) Ltd. v. Good Marketing and Sales (P.) Ltd., the Tribunal reiterated that the primary onus to prove the details of the 'Financial Contract' and default lies with the applicant. In the absence of such evidence, the application was dismissed without costs.
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