2020 (8) TMI 457 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its debt - default has been committed by dishonour of cheques - privity of contract - HELD THAT - tHE father and son have been working in tandem to defraud the Creditors and raising the false plea of there being no privity of contract between the Corporate Debtor and the Financial Creditors while being fully conscious of the fact that the financial assistance was obtained for promoting the business of the Corporate Debtor . While Mr. P.C. Pantulu acted as authorised representative of the borrower- Cybermate Infotek Limited , son Mr. P. Chandra Shekhar (Appellant), Director of the Corporate Debtor , acted as Guarantor. The Settlement deed dated 7th September, 2016 executed between the lenders including the Financial Creditors and the aforestated father and son duo is in furtherance of loan extended by the Financial Creditors to the Corporate Debtor towards discharge of liability of the Corporate Debtor . The Letter dated 1st February, 2017 issued by the Corporate Debtor to Respondent No.2 is also to the same effect. The Settlement Agreement dated 7th September, 2016 and the letter dated 1st February, 2017 admitting the debt on behalf of the Corporate Debtor confirm these conclusions. It is, therefore, of no avail for the Appellant to contend on behalf of the Corporate Debtor that the debt, liability in respect whereof has been admitted and acknowledged and default has been committed by dishonour of cheques, was not payable in law or in fact. The issue raised and the arguments advanced on behalf of the Appellant being devoid of merit are repelled - Appeal dismissed.

Issues:
Admission of application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the Corporate Debtor; Challenge to the impugned order on various grounds; Privity of contract between the Corporate Debtor and the Financial Creditors; Validity of Loan Agreement and Settlement Agreement; Liability admitted by the Corporate Debtor; Dishonored cheques and pending complaints under Section 138 of the Negotiable Instruments Act, 1881; Allegation of fraud by the Directors; Repudiation of liability by the Appellant; Identity of Cybermate Infotek Ltd. Inc. and Cybermate Infotek Ltd.; Deficiency of legal and factual basis for the appeal.

Analysis:
The judgment by the National Company Law Appellate Tribunal involved a joint application by 'Wincere Inc.' and 'Mr. Himanshu P. Kansara' under Section 7 of the Insolvency and Bankruptcy Code, 2016 against 'Cybermate Infotek Limited' as the Corporate Debtor. The appeal was made by the Director of the Corporate Debtor challenging the impugned order. The Financial Creditors based their claim on a Loan Agreement and a Settlement Deed, asserting that the Corporate Debtor had availed a loan and admitted liability. The Appellant contested the privity of contract between the Corporate Debtor and the Financial Creditors, highlighting discrepancies in agreements and balance sheets.

The Tribunal noted that the Corporate Debtor's admission of liability through a letter and subsequent dishonor of cheques undermined the Appellant's argument against privity of contract. The father and son duo, as Director and Managing Director of the Corporate Debtor, were found to have acted in concert to defraud Creditors. The Tribunal emphasized that the Loan Agreement, Settlement Deed, and admission of debt by the Corporate Debtor established the liability, dismissing the Appellant's repudiation of debt and the claim of separate legal entities.

Ultimately, the Tribunal rejected the appeal, concluding that the issues raised lacked merit, and upheld the impugned order without any legal or factual deficiencies. The judgment highlighted the coordinated actions of the Directors, the acknowledgment of liability by the Corporate Debtor, and the absence of legal grounds for the appeal. The Tribunal dismissed the appeal, with no costs awarded.

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