2022 (3) TMI 282 - AT - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - Corporate Debtor failed to make repayment of its dues - Financial Creditors - existence of debt and dispute or not - entire case of the Appellant as well as the Respondent is based on an alleged oral agreement/arrangement and the correctness of the same can be verified only by leading evidence available to both the parties before the Civil Court and cannot be done in summary proceedings before NCLT/NCLAT - HELD THAT - It is seen from the record that the Appellant has not disputed the rate at which the interest was payable either before the Adjudicating Authority or before this Tribunal and therefore the claim of the Appellant that interest was payable at 15% per annum is not substantiated by any documentary evidence. There are force in the contention of the Counsel for the Appellant that the amount remitted by the Appellant has been reflected in the Balance Sheet of the Respondent Company as Long Term Borrowings due to its tenure being 10 years and later to be converted to Investment . The amount cannot be construed as a default as on January, 2019. It is satisfying that the Appellant could not establish any default on the part of the Respondent by way of any documentary evidence - It is also an admitted fact that the Balance Sheet of the Respondent which was relied on by the Appellant, perusal thereof, crystal clear that the amount was accepted by the Respondent for investment purposes. There is no illegality in the impugned order while dismissing the Application filed by the Appellant under Section 7 of the IBC, therefore, the impugned order passed by the Ld. Adjudicating Authority (National Company Law Tribunal), New Delhi, Bench-III is hereby affirmed - the appeal is dismissed.

Summary

Issues Involved:
1. Dismissal of Insolvency Petition under Section 7 of the Insolvency and Bankruptcy Code, 2016.
2. Disputed oral agreement between the parties regarding loan vs. investment.
3. Failure to establish default by the Respondent.
4. Lack of documentary evidence supporting the claim of default.
5. Interpretation of balance sheet entries and investment purposes.

Analysis:
1. The Appellant filed an Appeal against the order dismissing the Insolvency Petition under Section 7 of the IBC. The Appellant claimed to have advanced a loan to the Respondent, which the Respondent disputed as an investment. The Appellant sent a recall notice to the Respondent for repayment, leading to the initiation of the Corporate Insolvency Resolution Process.

2. The core issue revolved around the nature of the transaction, with the Appellant asserting it was a loan while the Respondent argued it was an investment. The Appellant failed to provide substantial documentary evidence supporting the loan claim, leading to a lack of clarity in the agreement between the parties. The dispute required detailed evidence, not suitable for summary proceedings before NCLT/NCLAT.

3. The Appellant alleged default by the Respondent for non-repayment, supported by a recall notice. However, the Respondent contested the notice's validity, citing incorrect address and non-delivery as reasons for non-response. The Tribunal noted discrepancies in the notice delivery and lack of concrete evidence establishing default.

4. The Tribunal analyzed the balance sheet entries and found that the amount in question was categorized as 'Long Term Borrowings' by the Respondent, indicating an investment rather than a loan. The absence of documentary evidence substantiating the interest rate payable further weakened the Appellant's claim of default.

5. Ultimately, the Tribunal affirmed the Adjudicating Authority's decision to dismiss the Application under Section 7 of the IBC. The judgment emphasized the lack of illegality in the impugned order, citing the failure to establish default and the nature of the transaction as investment based on the balance sheet entries. The Appeal was dismissed, with no costs awarded.

This detailed analysis highlights the key legal arguments, evidentiary issues, and the Tribunal's reasoning behind affirming the dismissal of the Insolvency Petition, providing a comprehensive overview of the judgment.