2022 (6) TMI 917 - Tri - 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 - HELD THAT - On perusal of clause 35, there are no hesitation in holding that even on this basis, no legal obligation can be said to have arisen on the part of the respondent to repay the loan, which was taken by the vendor from the applicants herein. This Clause simply provides that confirming party is to receive the sale consideration from the vendor and vendor has also confirmed that he has received the payment from the confirming party (Applicant herein) and who have also said that they had no objection as regard to this sale deed. From the perusal of other clauses and specifically schedule of payment, it is noted that the four cheques of sale consideration were handed over to the vendor who in turn was liable to give the same to the applicant. In our view, in case of any failure by the vendor to do so, also does not result into a situation whereby such liability is to be met by the respondent herein. As regard the amount of ₹ 20,00,000/- being given by the Financial Creditors to the respondent herein, it is noted that it has been given on 29.04.2017 just a day prior to the execution of sale deed dated 1st May, 2017, which fact lends credence to the claims made by the respondent that such money was given to the respondent to execute the sale deed - the Financial Creditors have not been able to controvert the claim made on behalf of the respondent that such money was given as assurance money nor any documentary evidence has been produced to show that this money was in fact a loan, which was to be returned by the respondent. Further, in the absence of any agreement to this effect as well as no recall notice or other documentary evidence, we are of the view that even the facts of the amount being due and payable, cannot be ascertained, hence, there arises no question of default. In the present case, there is no relationship of Financial Creditors and Corporate Debtor between the applicants herein and the respondent. We further hold that there is no transaction of the nature of financial debt between the parties within the meaning of provision Section 5(8) of IBC, 2016 - Petition dismissed.

Summary

Issues:
Initiation of Corporate Insolvency Resolution Process under Insolvency and Bankruptcy Code, 2016 based on default in loan repayment and sale deed execution.

Detailed Analysis:

Issue 1: Default in Loan Repayment
- The Financial Creditor filed an application seeking initiation of Corporate Insolvency Resolution Process due to non-repayment of a loan amounting to ?4,06,10,000 by the Corporate Debtor.
- The loan was granted to various companies of Proplarity Home Pvt. Ltd. (PHPL), and the Corporate Debtor was involved in a sale deed where a sum of ?3,86,10,000 was to be paid to the Financial Creditors, but the payment was not made.
- Additionally, an amount of ?20,00,000 was paid to the Corporate Debtor, which remained unpaid, leading to the claim of default by the Financial Creditor.

Issue 2: Relationship between Financial Creditor and Corporate Debtor
- The Financial Creditor argued that a relationship existed between them and the Corporate Debtor due to the sale deed arrangement and acknowledgments made by the Corporate Debtor regarding the outstanding amount.
- However, the Corporate Debtor contended that no financial contract existed between the parties, and the loan agreement was solely between the vendor and the Financial Creditor, not involving the Corporate Debtor.
- The Corporate Debtor claimed that the amount of ?20,00,000 was non-refundable and given as assurance money for executing the sale deed, not as a loan to be repaid.

Issue 3: Legal Obligations and Default
- The Tribunal analyzed the terms of the sale deed, specifically Clause 35, and concluded that no legal obligation was imposed on the Corporate Debtor to repay the loan taken by the vendor from the Financial Creditor.
- The Tribunal found that the amount of ?20,00,000 was indeed given as assurance money and not as a loan, as claimed by the Financial Creditor, and no evidence was presented to prove otherwise.
- Consequently, the Tribunal held that there was no privity of contract between the Financial Creditor and the Corporate Debtor, and the application for Corporate Insolvency Resolution Process was dismissed.

Conclusion:
- The Tribunal dismissed the application, stating that there was no transaction constituting a financial debt between the parties, and the Corporate Debtor was not liable to repay the loan amount claimed by the Financial Creditor.
- The dismissal was in accordance with the provisions of the Insolvency and Bankruptcy Code, 2016, allowing the Financial Creditor to seek other legal remedies for recovery if advised to do so.