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2020 (10) TMI 384 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - existence of debt and dispute or not - HELD THAT - The transfer of the money from the petitioner to the respondent is evidenced by the Banking record. Further, its receipt is not denied by the respondents. They only seek to resist it on the point of limitation and the fact that no formal agreement was executed categorizing it as a Loan . This Bench is of the opinion that there need not be an agreement in writing to ascertain a financial transaction. The liability to pay interest, and if so, at what rate, may be debatable in the absence of a written contract, but a financial claim may be one with or without interest. The Corporate Debtor has acknowledged the same as a borrowing in their financial statements. This Bench is of the view that the objection raised by the respondents with respect to absence of a loan agreement is not fatal to the case of the financial creditor as the transaction itself is admitted. This bench is of the view that, the objections raised by the respondents with respect to absence of loan agreement is not fatal to the case of Financial Creditor since the transaction has not been denied by the Respondent. Further, this bench finds merit in the arguments made by the Ld. Senior Counsel appearing for the petitioner on the issue of limitation and commission of default. The law on this point is very clear that in matters where the term of the loan has not been fixed, the same is payable on Demand and the limitation shall commence when the loanee fails to respond, giving rise to a cause of action. The Demand in this case was made on dated 07.02.2019 and therefore, this petition which has been filed on 28.03.2019 is within the period of limitation - Petition admitted.
Issues:
1. Invocation of Section 7 of Insolvency and Bankruptcy Code, 2016 for Corporate Insolvency Resolution Process. 2. Claim of Financial Creditor barred by limitation. 3. Existence of loan agreement and objection to interest levied. 4. Transaction characterized as an advance towards property purchase. 5. Interpretation of financial debt under Section 5(8) of the Code. 6. Applicability of time value of money in determining financial debt. 7. Admission of the Petition under Section 7(5) of IBC 2016 and appointment of the IRP. Detailed Analysis: Issue 1: The Petitioner filed a Petition invoking Section 7 of the Insolvency and Bankruptcy Code against the Respondent for their inability to liquidate a claim. The Petitioner granted various loan facilities to the Respondent, leading to the initiation of Corporate Insolvency Resolution Process. Issue 2: The Respondent argued that the claim of the Financial Creditor was barred by limitation due to the absence of correspondence acknowledging the debt within a specific period. The Petitioner contended that the limitation commenced from the date of demand, supported by legal precedents. Issue 3: The Respondent resisted the claim on the grounds of the absence of a loan agreement and objection to interest levied. The Petitioner argued that the financial transaction was acknowledged by the Corporate Debtor and reflected in their financial statements, justifying the claim. Issue 4: The transaction was described as an advance towards property purchase, challenging its classification as a financial debt. Legal precedents were cited by both parties regarding the necessity of interest in defining a financial debt. Issue 5: The Tribunal analyzed the concept of financial debt under Section 5(8) of the Code, emphasizing that the transaction need not have an agreement in writing to be considered a financial claim. The acknowledgment by the Corporate Debtor and the nature of the transaction were crucial in determining the financial debt. Issue 6: The Tribunal deliberated on the applicability of time value of money in establishing a financial debt, considering the disbursement for land development as meeting the criteria under Section 5(8)(f) of the IBC, 2016. Legal judgments were referenced to support this interpretation. Issue 7: The Petition was admitted under Section 7(5) of the IBC, 2016, and an Insolvency Resolution Professional was appointed. The IRP was directed to proceed according to the law, with a progress report scheduled for a later date. This comprehensive analysis covers the legal judgment's key issues and the Tribunal's detailed reasoning on each aspect of the case.
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