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2021 (9) TMI 491 - Tri - Insolvency and BankruptcyMaintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - parties to development agreement - existence of debt and dispute or not - HELD THAT - One thing is clear that amount of ₹ 5,00,000/- had been paid by the Financial Creditor to the Corporate Debtor but the Financial Creditor has not produced anything on record that the amount had been paid to the Corporate Debtor as booking amount for a particular flat. The Development Agreement relied upon by the Financial Creditor is between the Landowners and the Corporate Debtor, and not between the Financial Creditor and the Corporate Debtor. Once it is proved that the amount advanced did not relate to booking of any flat, particularly in the absence of any agreement between the Financial Creditor and the Corporate Debtor to that effect, the Financial Creditor cannot make out a case for initiating CIRP against the Corporate Debtor. The amount given by the Financial Creditor to the Corporate Debtor may have been given for any purpose. No terms of any agreement, specific period, or continued investment, have been proved by any documents placed on record. Even the date of default, if at all, is not clear nor has any letter recalling the alleged loan/advance has been served on the Corporate Debtor or placed on record. The Financial Creditor may however, be free to seek its remedies elsewhere for recovery of the amount of ₹ 5,00,000/- with or without interest as the case may be, as per the documents in its possession. But certainly, it is not a case for initiation of CIRP under section 7 of the IBC, 2016. This is not a fit case for admission - petition dismissed.
Issues Involved:
1. Validity of the debt claim by the Financial Creditor. 2. Existence of an agreement or contract between the parties. 3. Applicability of the Limitation Act. 4. Classification of the Financial Creditor under the Insolvency and Bankruptcy Code (IBC), 2016. 5. Admissibility of the petition under Section 7 of the IBC, 2016. Detailed Analysis: 1. Validity of the Debt Claim by the Financial Creditor: The Financial Creditor claimed that a sum of ?5,00,000 was advanced to the Corporate Debtor for the purchase of a flat, which was to be delivered by 30th September 2016. In case of delay, the amount was to be refunded with 18% interest per annum. The Corporate Debtor's balance sheets from 2014 to 2018 reflected this amount under "Advance against Property." However, the Corporate Debtor disputed this claim, stating that no supporting documents, such as a Money Receipt or Agreement for Sale, were provided to substantiate the claim. 2. Existence of an Agreement or Contract Between the Parties: The Tribunal noted that the Development Agreement was between the Corporate Debtor and the landowners, not the Financial Creditor. There was no privity of contract between the Financial Creditor and the Corporate Debtor. The lack of a formal agreement or contract specifying the terms of the advance and the conditions for repayment or interest undermined the Financial Creditor's claim. 3. Applicability of the Limitation Act: The Corporate Debtor argued that the petition was barred by the laws of limitation, as the debt was not acknowledged within the statutory period. The Financial Creditor relied on the balance sheets as acknowledgments of debt under Section 18 of the Limitation Act. However, the Tribunal found that the balance sheets did not constitute valid acknowledgments extending the limitation period. 4. Classification of the Financial Creditor under the IBC, 2016: The Financial Creditor argued that the amount advanced constituted a "Financial Debt" under Section 5(8)(f) of the IBC, 2016. However, the Tribunal held that the Financial Creditor did not qualify as a "Financial Creditor" as there was no evidence that the amount was disbursed against the consideration for the time value of money. The Tribunal referred to various judgments, including Vishwa Nath Singh Vs. Visa Drugs & Pharmaceuticals Private Limited, to support this conclusion. 5. Admissibility of the Petition under Section 7 of the IBC, 2016: The Tribunal concluded that the Financial Creditor failed to prove that the amount advanced was for the booking of a specific flat or that there was an agreement to pay interest. The absence of a clear date of default and any formal notice recalling the loan further weakened the case. Consequently, the Tribunal rejected the petition, stating that the Financial Creditor could seek remedies elsewhere but not under the IBC, 2016. Conclusion: The petition filed under Section 7 of the IBC, 2016, was rejected as the Financial Creditor failed to establish a valid debt claim, the existence of a binding agreement, and compliance with the limitation period. The Tribunal held that the Financial Creditor did not qualify as a "Financial Creditor" under the IBC, 2016, and thus, the petition was not admissible for initiating the Corporate Insolvency Resolution Process (CIRP) against the Corporate Debtor.
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